Sovereign ratings on the mend: Moody's

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Sovereign upgrades in 2010 exceeded downgrades, reversing the trend of the past couple of years, according to Moody's Investors Service.

At the issuer level, there were twice as many sovereign upgrades as downgrades. As a result, the downgrade-to-upgrade ratio, which peaked at the height of the global financial crisis, fell back closer to its pre-crisis level. In contrast, corporate downgrades still exceeded corporate upgrades in 2010.

However, rating actions were not uniformly distributed across regions. "The vast majority (70%) of downgrades occurred in Europe, while 56% of upgrades were implemented for sovereigns in the Americas region and a further 39% for sovereigns in both Asia-Pacific and Middle East and Africa regions", says Moody's in a research report.

A comparison between sovereign and corporate default rates shows that sovereign default rates have been, on average, modestly lower than those for corporates, overall and by like rating symbol. "However, the differences are not likely significant as the overall size of the sovereign sample is small".

The study presents an analysis of all sovereign defaults since 1983 and compares and contrasts sovereigns and corporates with regard to default, migration and recovery rates as well as ratings accuracy measures.