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‘AAA’ rated sovereigns plunge to 13 year low, says Fitch

The office of Fitch Ratings in New York.
Cem Ozdel | Anadolu Agency | Getty Images

The number of countries assigned the top 'AAA' rating by credit ratings agency Fitch has slunk to a 13-year low with no improvement expected in the coming two years.

Only eleven countries currently hold the coveted highest rating which compares to a peak of 16 sovereigns in the period from 2004 – 2009, according to a press release from Fitch Ratings on Thursday.

This accounts for less than a tenth of Fitch's global sovereign portfolio by number of companies and equates to two-fifths of global government debt outstanding. The corresponding figure a decade ago reached as high as 48 percent.

"We have concerns about high government debt in a number of advanced economies," James McCormack, global head of sovereign ratings at Fitch, told CNBC via email.

"As debt levels have risen in the aftermath of the global financial crisis, ratings have come down.

"This is the primary reason why many downgraded advanced economies have not yet been upgraded, despite the reduction in government bond yields.

"In essence, the ratings' view and the markets' view have diverged, with ratings more focused on the deterioration in sovereign fundamentals."

Of the countries still holding 'AAA' status, none has a Negative Outlook, implying it would be unlikely for a downgrade to occur within the next two years. Conversely, none of the sovereigns holding 'AA+' status, which sits one tier below the top rung, have a Positive Outlook, meaning an upgrade over the same time frame would be equally unlikely.

Little movement tends to be seen at the 'AAA' level with an average of 97.5 percent of nations over the past 20 years maintaining their status if they began the year in the top rating tier.

Australia is the only country within the past decade to have joined the top ranks, securing its upgrade in 2011. In the most recent seven year period following the financial crisis, six countries have lost 'AAA' status.

Those alongside Australia in the top bracket comprise Canada, Denmark, Germany, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland and the United States.

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