Sovereign rating

A rating agency's assessment of a government's ability and willingness to service its debt.

It acts as a ceiling in practice, since companies domiciled in a country are rarely rated above their sovereign, which raises the borrowing cost of every issuer in that country.

For valuation the rating feeds the country risk premium, usually through the default spread implied by the rating.

Ratings change slowly and market spreads change quickly. The spread is the live measure.