Comments on: What does it mean when a country’s credit rating is being downgraded by rating agencies?

By: SDD

SDD — Sun, 07 Feb 2010 18:45:59 +0000

The purpose of it is to estimate risk premium. It's the same reason you might charge higher interest on a loan to someone who has a tenuous job than someone who can't be fired.
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By: Dr. House

Dr. House — Sun, 07 Feb 2010 18:34:59 +0000

See 3d answer. Let me add this: and therefore that their debt in the secondary markets looses value.For example: Mexico's debt: 0.65 c to the dollar. Peru: 0.25c to the dollar. Haiti: 0.05 c to the dollar or the price of recycling paper whatever is cheaper.
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By: joe1max

joe1max — Sun, 07 Feb 2010 18:09:59 +0000

Ratings is how credit worthy a organization is. In this case a country, but it is also used for corporations. It is similar to your credit score.

The reason a country, or an organization has a credit rating is to give investors, or loaners an idea of how capable the organization is to pay back the debt.

If the US gets downgraded to a Bbb credit rating it is basically like saying that their is a greater risk that the US can no longer pay its debt. It is like your credit score going down.
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By: Eddy T

Eddy T — Sun, 07 Feb 2010 17:54:59 +0000

A country that has a high credit rating by rating agencies means that it can borrow and pay its interest payments promptly and the loan repayment on maturity.
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By: meg

meg — Sun, 07 Feb 2010 17:45:59 +0000

Government default on their debts just like homeowners and companies. It means their bonds are considered to be risky so they will have to pay a higher interest rate to borrow.
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