BOFIT Weekly Review 2015/03
Fitch downgrades Russia’s creditworthiness
International credit ratings specialist Fitch announced last Friday (Jan. 9) that it had cut its ratings on Russian sovereign debt from BBB to BBB-, Fitch’s lowest investment-grade rating. Fitch said the downgrade was warranted in light of the deteriorating outlook for the Russian economy over the second half of 2014.
Standard & Poor’s lowered its rating of Russian sovereigns to its bottom investment-grade category last April as the Ukraine crisis flared. The final big-three ratings agency, Moody’s, continues to hold its rating of Russian sovereigns one notch above its lowest investment grade.
The outlooks of all three ratings agencies were negative. Any further lowering from Fitch or Standard & Poor’s would push Russian borrowing down into the realm of “speculative grade.” Many institutional investors have rules barring them from holding speculative-grade bonds, which are considered so risky that they are only recommended for well-informed investors capable of absorbing substantial losses.