Seven Assumptions About Highly Rated Sovereigns And Multilateral Lending Institutions

Seven Assumptions About Highly Rated Sovereigns And Multilateral Lending Institutions

When one considers what drives bond prices–such as interest rates, liquidity conditions, currency movements, and investors’ attitudes toward risk–creditworthiness comes pretty far down the list at the higher end of the ratings spectrum. Since 1975, for example, we have lowered only 3% of ‘AAA’ sovereign ratings on average in the ensuing 12 months, 13% over the ensuing five years, and 29% over the ensuing 15 years. By contrast, bond prices have broadly fluctuated in the past four decades. Overall, this level of sovereign credit rating stability is much greater than for corporate and bank ratings. Moreover, the creditworthiness of multilateral lending institutions (MLIs) has been even more stable. We expect the stability of highly rated sovereigns and MLIs to continue. That expectation, however, is founded on a number of assumptions. This article examines seven of them. Some of these apply across all sovereigns or MLIs, while others are issuer-specific.

 

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About AIWMI

The Association of International Wealth Management of India (AIWMI) is a not-for-profit organization and a globally recognized membership association for finance professionals. AIWMI primarily focuses on the broad and strategic role of developing a more robust and forward-looking training infrastructure for the financial services sector and to promote more active industry involvement and collaboration in training and continuing education. AIWMI is offering advanced international certification programs along with a wide variety of high-quality executive education programs. AIWMI programs combine state-of-the-art knowledge and skills with practical experience and insights into the functioning of the financial sector. All AIWMI courses and educational events have an intense and pragmatic curriculum. Participants are exposed to the latest developments within the financial services sector. AIWMI plays a key role in guiding the development of the financial services sector. AIWMI works with key industry participants’ viz. the Government, the Regulators, the Industries/Associations, the Corporate, the Media and the General Public to achieve its objectives. Besides enhancing technical competence and professionalism in the industry, AIWMI organizes events and facilitates discussions to promote best practices in leadership and talent development in the financial sector with an aim to become Asia’s premier center of excellence for financial education.

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