The Use of Rating Trends in the Context of Sovereign Ratings

This commentary reviews the use of rating trends among DBRS-rated sovereign governments over the past decade. Among sovereigns historically-rated by DBRS, a change in their rating trend assignments have reliably signalled the most likely rating actions. While the results of this study are likely skewed by the global financial crisis that occurred during the review period, this review provides insight into what rating trends signal in the context of sovereign ratings and how they have been used over time. It is not an assessment of the ‘future’ ability of trends to predict rating actions.