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News

KBRA Assigns AAA Long-Term Rating to Canada

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Kroll Bond Rating Agency (KBRA) assigns AAA long-term issuer ratings to Canada. KBRA also assigns K1+ short-term issuer ratings to the sovereign. The long-term ratings have a Stable Outlook. The ratings are unsolicited.

 

Ratings

        Rating       Outlook       Action
Foreign Currency Sovereign RatingLong Term       AAA       Stable       Assigned
Local Currency Sovereign RatingLong Term AAA Stable Assigned
Foreign Currency Sovereign RatingShort Term K1+ Assigned
Local Currency Sovereign RatingShort Term       K1+               Assigned
 

Main Credit Support Factors:

  • Large and wealthy country with proven capacity to weather shocks.
  • Substantial liquidity provided for by minor reserve currency status (approximately 2% of allocated global official reserves).
  • A low federal government net debt burden, strong federal government balance sheet, and sound fiscal policy environment. Funding of pension system is a supportive factor to fiscal stability. Substantial public assets reduce net debt substantially to below 30% of GDP; very favorable compared to peers.
  • Responsible macroeconomic policymaking and oversight of the economy.
  • Very high level of institutional development and low level of political and policy risk.

Main Credit Weaknesses:

  • High household indebtedness in the context of recent significant housing price appreciation in major metropolitan cities. Housing price correction could be destabilizing, although KBRAs expectation is that it would not significantly impair financial stability. The governments guaranty of mortgage insurers is a substantial contingent liability to the sovereign.
  • Vulnerability to oil prices. Energy sector exports account for about 20% of exports.
  • With 75% of exports destined to the U.S., the new trade agreement between Mexico, Canada, and the U.S. is important to Canadas economic prospects. Note, more than 60% of trade falls outside of this pact and commercial linkages remain strong. New trade agreements with the European Union (EU) and Asia-Pacific position Canada well to diversify its trade concentration away from the U.S. market.

The rating methodology used for these ratings was Sovereigns Rating Methodology published on May 11, 2017.

Related Reports:

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Analytical:
Joan
Feldbaum-Vidra, Managing Director
(646) 731-2362
jfeldbaumvidra@kbra.com

Alan
Madden, Director
+353 (1) 669-2683
amadden@kbra.com

Van
Hesser, Senior Managing Director
(646) 731-2305
vhesser@kbra.com

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