The number of actual sovereign defaults has remained moderate despite the stress on government finances and sovereign credit ratings, observes Moody’s Investors Service in a new study.
The report highlights the fact that Greece, among more than 110 Moody’s-rated sovereigns, was the only one to default since the start of 2011. Jamaica defaulted in 2010, there were no rated sovereign defaults in 2009, and Ecuador defaulted in late 2008.
“The global financial crisis has, however, continued to put pressure on sovereign creditworthiness, increasing the share of sovereign issuers in the lower tier of investment grade,” finds the Moody’s study.
Nevertheless, it says the proportion of highly rated issuers is still substantially larger for sovereign issuers than for corporate issuers, and sovereign ratings have exhibited greater stability than their corporate counterparts over the years.
Moreover, a comparison between sovereign and corporate default rates by the rating agency shows that sovereign default rates have generally been, on average, modestly lower than those for corporates. Although it also notes that the differences are not likely significant as the overall size of the sovereign sample is small.