Share
Explore BrainMass

Bond ratings and government debt.

The U.S. government bonds had a rating of AAA. I know in the news over the last several years, there have been concerns on the amount of borrowing our government has done especially from China. Why does it get the rating? Is it a surprise that the bond gets a rating this high given the level of government debt?

Solution Preview

The most commonly used bond ratings are given by Moody's, S&P and Fitch. These ratings represent the opinions of analysts and actuaries, and are an important indicator of the bond's potential to default.

The statement that "The U.S. government bonds had a rating of AAA" is not exactly true, depending on when this statement was made. Note that this AAA rating most likely refers to the rating given by either S&P or Fitch (Moody's ratings use different symbols). In 2011, the ratings of U.S. government bonds fell from AAA to AA+/A-1+. In March 2014, Fitch resumed the rating to AAA.

The U.S. Debt currently stands at over $17 trillion. There have indeed been concerns on the amount the U.S government borrows from China. How much of the U.S. federal debt does China actually own? In total, China owns only about 8 percent of publicly-held U.S. debt. About 66 percent of U.S. debt is owned by the American people and the U.S. government. The ...

Solution Summary

The expert examines bond ratings and government debt with a AAA rating. The surprises that the bond gets a rating this high given the level of government debt is determined. The solution is answered in 538 words with eight sources cited. The opinions are supported by sources.

$2.19