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COMMENTS

Default, Transition, and Recovery: 2021 Annual International Public Finance Default And Rating Transition Study

COMMENTS

Credit Trends: U.S. Corporate Bond Yields As Of Nov. 30, 2022

COMMENTS

Credit Trends: 'BBB' Pulse: Fallen Angel Trend Resists Pressures

COMMENTS

Credit Trends: Risky Credits: North America's 'CCC+' And Below Rated Debt Reaches $230 Billion

COMMENTS

Credit Trends: Risky Credits: In Emerging Markets, Downward Rating Transitions Prevail


Default, Transition, and Recovery: 2021 Annual International Public Finance Default And Rating Transition Study

The international public finance (IPF) sector is divided into two main categories: local and regional governments (LRGs), like states, provinces, regions, cities, towns, and oblasts; and non-LRGs, like non-U.S. universities, hospital systems, transportation systems, and housing providers. At the start of 2022, S&P Global Ratings rated 286 LRG issuers and 139 non-LRG issuers.

Upgrades of IPF entities increased to 34 in 2021 from only one in 2020, and downgrades decreased to 18 from 41. There were two defaults in 2021, down from seven in 2020. Both defaulters were Argentine provinces: The province of Jujuy defaulted on a distressed debt exchange, while the province of Cordoba missed an interest payment.

Rating Actions

Of the 34 upgrades in IPF in 2021--a marked increase with respect to 2020 (see chart 1)--16 were for confidentially rated LRG issuers and seven were for New Zealand LRGs (following the action taken on the sovereign).

The tally of 18 downgrades was significantly below the average over the past 10 years of 35 downgrades. Seven downgrades were for social housing providers located in the U.K., due to various causes (elevated planned capex triggering high indebtedness, liquidity pressures, governance issues), and six downgrades were for Canadian issuers: four airport authorities facing the adverse effects of travel restrictions triggered by the COVID-19 pandemic and two provinces (British Columbia and Alberta) due to the pandemic's blow to fiscal results and debt (British Columbia) and pandemic-driven after-capital deficits (Alberta).

Defaults fell to two in 2021 from seven in 2020, lowering the default rate to 0.47% from 1.65%.

IPF has averaged 29 upgrades per year over the past 10 years, compared with 35 downgrades per year over the same period. In the 21 years since 2001, upgrades have outnumbered downgrades in 14 years. The 40 more downgrades than upgrades in 2020 is not outside the range of experience for this sector. Such was the case in 2016, when the downgrade of the U.K. following the Brexit referendum resulted in increased downgrades, with 32 more downgrades than upgrades.

From 2018 onward, downgrades outnumbered upgrades in the non-LRG sector (see charts 2 and 3). In 2021, 61% of the IPF downgrades came from non-LRG issuers within the transportation and housing sectors. This reflects the substantial aid channeled from sovereigns to LRGs to prevent financial strain and preserve their credit quality. It also reflects the relative resilience of LRGs in general compared with more economically sensitive sectors, as well as the disproportionate impact of the pandemic on the transportation sector in particular.

Chart 1

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Chart 2

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Chart 3

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Rating movements have been historically gradual, with the ample majority being one-notch movements (see chart 4). Nonetheless, three issuers (all confidentially rated) were upgraded by three notches in 2021. The two issuers that were downgraded by two notches in 2021 defaulted, shifting to 'D' from 'CC'.

Chart 4

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Last year credit performance diverged by region: Most of the upgrades were located in Asia-Pacific (71%), while the major part of downgrades came from Western Europe (44%). Canada saw 13% of ratings lowered in 2021, while Latin America saw 5%. The Eastern Europe, Middle East, and Africa (EEMEA) region experienced four upgrades, all for confidentially rated issuers.

Chart 5

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Outlooks

The negative trend in outlooks over the past five years broke in 2021 (see chart 6), with 52 negative outlooks by Jan. 1, 2022, compared with 98 at the start of 2021 and 53 at the start of 2020. Meanwhile, positive outlooks slightly increased to 21 as of Jan. 1, 2022, from 17 at the start of 2021 and 21 at the start of 2020.

This mirrors the positive global credit momentum in 2021, with many negative outlooks revised to stable without downgrading. Western Europe had the most negative outlooks at the start of 2022, with 29, followed by Asia-Pacific with 11. The percentage of stable outlooks across IPF issuers was 83% in 2021, up from 73% the previous year.

Chart 6

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Rating Transitions

IPF ratings generally move into lower rating categories over time, although 'A' category ratings have an upward pattern. Just 4% of 'A' category ratings move into lower rating categories after 15 years.

Lower ratings tend to move more frequently into higher rating categories than into lower categories, but the lower rating categories account for almost all defaults at all time frames. Around 12.3% of 'BB' category ratings move into higher rating categories after 15 years, but 18.1% within this category default. About 27.8% of 'B' category ratings move into the 'BB' category after 15 years, and 11.3% default. After 15 years, 66.7% of 'CCC' through 'C' category ratings move to higher rating categories, 18.5% default, and 14.8% are withdrawn.

Table 1

International Public Finance Rating Transitions Without Modifiers (1975-2021)
(%) AAA AA A BBB BB B CCC/C D NR
Rating --Rating one year later--
AAA 94.5 4.2 0.0 0.0 0.0 0.0 0.0 0.0 1.3
AA 0.9 93.4 2.5 0.3 0.0 0.0 0.0 0.0 2.9
A 0.0 3.8 89.6 1.9 0.1 0.0 0.0 0.0 4.7
BBB 0.0 0.0 4.5 82.0 3.9 0.0 0.0 0.0 9.5
BB 0.0 0.0 0.0 2.7 86.1 1.8 0.4 0.8 8.3
B 0.0 0.0 0.0 0.0 7.5 71.8 5.9 2.1 12.7
CCC/C 0.0 0.0 0.0 0.0 0.0 25.3 51.8 14.5 8.4
--Rating three years later--
AAA 84.0 11.7 0.1 0.3 0.0 0.0 0.0 0.0 3.9
AA 2.9 81.7 6.4 0.9 0.1 0.0 0.0 0.0 8.0
A 0.0 11.6 70.3 4.9 0.2 0.0 0.0 0.0 13.0
BBB 0.0 0.0 11.1 56.8 8.8 0.5 0.0 0.3 22.5
BB 0.0 0.0 0.0 6.6 67.7 3.6 0.5 3.1 18.5
B 0.0 0.0 0.0 0.0 19.5 34.5 8.9 7.6 29.4
CCC/C 0.0 0.0 0.0 0.0 2.7 58.9 9.6 13.7 15.1
--Rating five years later--
AAA 74.3 18.1 0.7 0.6 0.0 0.0 0.0 0.0 6.4
AA 4.9 71.8 8.8 1.6 0.2 0.0 0.0 0.0 12.6
A 0.1 18.3 54.5 6.5 0.1 0.1 0.0 0.0 20.2
BBB 0.0 0.0 14.5 41.4 12.1 0.8 0.2 0.8 30.3
BB 0.0 0.0 0.0 8.2 55.2 3.9 0.4 5.5 26.9
B 0.0 0.0 0.0 0.9 23.7 22.9 5.4 7.4 39.7
CCC/C 0.0 0.0 0.0 0.0 15.7 31.4 10.0 21.4 21.4
--Rating 10 years later--
AAA 52.4 36.1 1.6 0.0 0.0 0.0 0.0 0.0 10.0
AA 9.2 52.2 9.5 5.1 0.7 0.1 0.0 0.0 23.1
A 1.4 27.4 30.1 6.7 0.6 0.0 0.0 0.0 33.9
BBB 0.0 0.0 9.1 25.9 12.8 2.0 0.0 0.5 49.6
BB 0.0 0.0 0.4 8.3 32.4 3.6 0.0 13.1 42.3
B 0.0 0.0 0.0 3.4 24.3 10.3 2.7 10.6 48.7
CCC/C 0.0 0.0 0.0 14.3 16.7 9.5 4.8 26.2 28.6
--Rating 15 years later--
AAA 38.3 47.4 2.3 0.0 0.0 0.0 0.0 0.0 12.0
AA 11.2 40.8 8.1 7.1 1.2 0.2 0.0 0.3 31.2
A 2.5 29.9 23.2 3.7 0.3 0.0 0.0 0.0 40.3
BBB 0.0 1.1 9.9 18.3 9.5 0.4 0.0 0.0 60.8
BB 0.0 0.0 0.0 12.3 22.3 4.4 0.0 18.1 42.9
B 0.0 0.0 0.0 2.3 27.8 0.0 2.3 11.3 56.4
CCC/C 0.0 0.0 0.0 22.2 33.3 11.1 0.0 18.5 14.8
NR--Not rated. Source: S&P Global Ratings Research.

LRG rating movement after 15 years is slightly more negative (see table 2), but the percentage of ratings that default within 15 years in all rating categories is virtually the same in the LRG sector as for IPF overall.

Table 2

Local And Regional Government Rating Transitions Without Modifiers (1975-2021)
(%) AAA AA A BBB BB B CCC/C D NR
Rating --Rating one year later--
AAA 94.4 4.1 0.0 0.0 0.0 0.0 0.0 0.0 1.5
AA 1.0 93.5 2.0 0.3 0.0 0.0 0.0 0.0 3.1
A 0.0 4.5 88.0 2.3 0.1 0.0 0.0 0.0 5.2
BBB 0.0 0.0 3.7 83.2 4.1 0.0 0.0 0.0 8.9
BB 0.0 0.0 0.0 2.7 86.0 1.9 0.4 0.8 8.2
B 0.0 0.0 0.0 0.0 7.6 72.0 5.9 2.1 12.3
CCC/C 0.0 0.0 0.0 0.0 0.0 26.3 52.5 13.8 7.5
--Rating three years later--
AAA 83.7 11.2 0.2 0.3 0.0 0.0 0.0 0.0 4.7
AA 3.3 81.8 5.1 1.1 0.1 0.0 0.0 0.0 8.5
A 0.0 12.7 66.5 5.8 0.3 0.0 0.0 0.0 14.7
BBB 0.0 0.0 9.3 59.9 9.1 0.6 0.0 0.3 20.9
BB 0.0 0.0 0.0 6.7 67.4 3.8 0.5 3.2 18.4
B 0.0 0.0 0.0 0.0 19.7 34.8 9.0 7.7 28.9
CCC/C 0.0 0.0 0.0 0.0 2.9 61.4 10.0 12.9 12.9
--Rating five years later--
AAA 74.0 17.0 0.8 0.7 0.0 0.0 0.0 0.0 7.6
AA 5.6 72.0 7.1 1.9 0.3 0.0 0.0 0.0 13.2
A 0.0 18.3 49.9 8.4 0.2 0.1 0.0 0.0 23.1
BBB 0.0 0.0 12.4 44.8 12.4 0.9 0.2 0.9 28.4
BB 0.0 0.0 0.0 8.3 54.7 4.0 0.4 5.7 26.8
B 0.0 0.0 0.0 0.9 23.9 23.1 5.5 7.5 39.2
CCC/C 0.0 0.0 0.0 0.0 16.4 32.8 10.4 20.9 19.4
--Rating 10 years later--
AAA 51.6 34.4 2.0 0.0 0.0 0.0 0.0 0.0 12.0
AA 10.4 51.2 8.7 6.1 0.8 0.1 0.0 0.0 22.7
A 0.9 25.2 26.2 8.3 0.8 0.0 0.0 0.0 38.6
BBB 0.0 0.0 7.1 29.2 14.2 2.3 0.0 0.6 46.7
BB 0.0 0.0 0.4 8.5 31.7 3.7 0.0 13.4 42.3
B 0.0 0.0 0.0 3.4 24.5 10.3 2.7 10.7 48.3
CCC/C 0.0 0.0 0.0 15.4 17.9 10.3 5.1 25.6 25.6
--Rating 15 years later--
AAA 35.5 47.8 2.7 0.0 0.0 0.0 0.0 0.0 14.0
AA 12.1 39.4 7.3 8.4 1.4 0.2 0.0 0.3 30.9
A 1.8 29.7 20.4 4.8 0.4 0.0 0.0 0.0 43.0
BBB 0.0 0.0 9.0 21.5 11.2 0.4 0.0 0.0 57.9
BB 0.0 0.0 0.0 12.5 22.2 4.5 0.0 18.5 42.4
B 0.0 0.0 0.0 2.3 28.2 0.0 2.3 11.5 55.7
CCC/C 0.0 0.0 0.0 22.2 33.3 11.1 0.0 18.5 14.8
NR--Not rated. Source: S&P Global Ratings Research.

From a regional perspective, this analysis focuses only on LRGs. There is considerable overlap for IPF and LRGs, and the small sample size of non-LRG ratings in some regions renders breakouts misleading.

In one year, an average of 16.7% of Canadian LRG ratings in the 'BBB' category are raised to the 'A' category (see table 3). In Latin America, the trend is opposite, with 8.5 % of 'BBB' category ratings moving down to the 'BB' category within one year. For Western Europe, 9.8% of 'BB' category ratings move into the 'BBB' category within one year, and of 'B' category ratings in EEMEA, 12.2% are raised to the 'BB' category, while just 7.0% are lowered or default.

Table 3

Local And Regional Government One-Year Rating Transitions Without Modifiers By Region (1975-2021)
(%) --Rating one year later--
Rating AAA AA A BBB BB B CCC/C D NR
Global
AAA 94.4 4.1 0.0 0.0 0.0 0.0 0.0 0.0 1.5
AA 1.0 93.5 2.0 0.3 0.0 0.0 0.0 0.0 3.1
A 0.0 4.5 88.0 2.3 0.1 0.0 0.0 0.0 5.2
BBB 0.0 0.0 3.7 83.2 4.1 0.0 0.0 0.0 8.9
BB 0.0 0.0 0.0 2.7 86.0 1.9 0.4 0.8 8.2
B 0.0 0.0 0.0 0.0 7.6 72.0 5.9 2.1 12.3
CCC/C 0.0 0.0 0.0 0.0 0.0 26.3 52.5 13.8 7.5
Canada
AAA 95.4 3.1 0.0 0.0 0.0 0.0 0.0 0.0 1.5
AA 1.0 97.4 0.9 0.0 0.0 0.0 0.0 0.0 0.7
A 0.0 6.0 92.3 0.3 0.0 0.0 0.0 0.0 1.4
BBB 0.0 0.0 16.7 66.7 0.0 0.0 0.0 0.0 16.7
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Asia-Pacific
AAA 93.8 4.2 0.0 0.0 0.0 0.0 0.0 0.0 2.1
AA 1.0 92.8 1.9 0.0 0.0 0.0 0.0 0.0 4.3
A 0.0 3.1 91.0 1.3 0.0 0.0 0.0 0.0 4.5
BBB 0.0 0.0 6.5 69.2 0.0 0.0 0.0 0.0 24.3
BB 0.0 0.0 0.0 0.0 44.4 0.0 0.0 0.0 55.6
B 0.0 0.0 0.0 0.0 6.7 40.0 0.0 0.0 53.3
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Latin America
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 86.5 8.5 0.0 0.0 0.0 4.9
BB 0.0 0.0 0.0 1.7 88.3 2.0 0.2 1.0 6.7
B 0.0 0.0 0.0 0.0 3.9 74.5 6.1 3.5 12.1
CCC/C 0.0 0.0 0.0 0.0 0.0 21.4 59.5 16.7 2.4
Western Europe
AAA 94.2 4.5 0.0 0.0 0.0 0.0 0.0 0.0 1.3
AA 1.1 92.1 2.5 0.6 0.0 0.0 0.0 0.0 3.7
A 0.0 3.9 84.1 3.9 0.2 0.0 0.0 0.0 8.0
BBB 0.0 0.0 4.9 84.6 2.3 0.0 0.0 0.0 8.3
BB 0.0 0.0 0.0 9.8 82.6 1.1 0.0 0.0 6.5
B 0.0 0.0 0.0 0.0 25.0 50.0 0.0 0.0 25.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EEMEA
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 5.6 86.1 2.8 0.0 0.0 0.0 0.0 5.6
BBB 0.0 0.0 4.4 87.8 5.6 0.0 0.0 0.0 2.2
BB 0.0 0.0 0.0 4.1 83.3 1.8 1.4 0.5 9.0
B 0.0 0.0 0.0 0.0 12.2 72.1 6.4 0.6 8.7
CCC/C 0.0 0.0 0.0 0.0 0.0 31.6 44.7 10.5 13.2
NR--Not rated. EEMEA--Eastern Europe, Middle East, and Africa. Source: S&P Global Ratings Research.

Defaults

There were two defaults in 2021, both located in Argentina.

In the aggregate, issuers rated 'CCC' through 'C' defaulted at a rate of 43.1% within 15 years (see table 4). About 17.8% of speculative-grade (rated 'BB+' or lower) issuers defaulted within 15 years, compared with just 0.3% of investment-grade (rated 'BBB-' or higher) issuers. In total, 4.8% of IPF issuers default within 15 years.

Table 4 offers insights as well on the pace of defaults: Cumulative yearly average default rates (see "Average cumulative default rate calculation " in the appendix) end their increase after seven years for the 'BBB' and 'CCC' rating categories and after 12 years for 'BB' category rated issuers, and then keep increasing progressively within the 'B' category. This demonstrates that the probability of default for a rating in the 'B' category grows every year for a period of at least 15 years.

These trends are intuitive, reflecting higher default rates for lower-rated obligations.

Table 4

Local And Regional Government Cumulative Yearly Average Default Rates Without Rating Modifiers (1975-2021)
(%) --Time horizon (years)--
Rating 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.2 0.2 0.2
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.1 0.3 0.4 0.8 1.2 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4
BB 0.8 2.1 3.1 4.3 5.3 6.3 7.3 8.5 9.7 10.6 11.4 12.0 12.0 12.0 12.0
B 2.1 5.3 9.1 12.2 13.3 14.1 14.7 16.3 17.9 19.6 21.4 23.5 25.8 27.9 28.6
CCC/C 13.8 16.4 16.4 16.4 24.9 33.6 41.3 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1
Investment-grade 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3
Speculative-grade 1.7 3.5 5.2 6.8 8.2 9.5 10.7 12.0 13.3 14.4 15.4 16.4 17.1 17.7 17.8
All rated 0.4 0.9 1.4 1.8 2.2 2.6 2.9 3.3 3.6 3.9 4.2 4.4 4.6 4.8 4.8
Calculated by multiplying nondefault marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Because specific events may trigger defaults, defaults tend to happen in clusters. For example, 10 occurred in Mexico between 2010 and 2013. Additionally, there were seven defaults in Argentina in 2020 and five between 2001 and 2003, four in Brazil between 2018 and 2019, and three in Russia in 1999. Seven of the Mexican defaults occurred in 2012.

Table 5

IPF Defaults
Local and regional government selective defaults
SD date Emergence date Months in SD Rating one year before SD Rating at emergence from SD
LRG 1* January 25, 1999 - - BB- -
LRG 2* January 25, 1999 October 9, 2001 32.46 CCC+
LRG 3* February 22, 1999 January 11, 2000 10.61 BB- CCC-
LRG 4* March 28, 2001 July 26, 2002 15.93 BB

Buenos Aires (Province of)

December 3, 2001 October 9, 2006 58.19 BB B+

Mendoza (Province of)

December 3, 2001 September 7, 2004 33.15 BB- CCC+

Buenos Aires (City of)

April 11, 2002 March 21, 2003 11.30 B+ CCC+
LRG 5* May 4, 2002 - - B+ -
LRG 6* January 15, 2003 - - CC -

Moscow (Oblast)

December 18, 2008 - - BB -
LRG 7* November 5, 2009 - - CC -

City of Lviv

January 28, 2010 January 28, 2010 0.00 B CCC+
LRG 8* November 5, 2010 December 6, 2010 1.02 BB B-
LRG 9* February 3, 2012 February 13, 2012 0.33 BB- B-
LRG 10* February 28, 2012 - - NR -
LRG 11* July 9, 2012 June 23, 2014 23.46 BB B-
LRG 12* September 26, 2012 January 31, 2013 4.17 BB- B-
LRG 13* October 31, 2012 - - NR -
LRG 14* October 31, 2012 - - BB -
LRG 15* December 24, 2012 - - NR -
LRG 16* January 8, 2013 March 18, 2013 2.27 BB- B-
LRG 17* May 10, 2013 May 15, 2013 0.16 BB- B-

Crimea (Autonomous Republic of)

April 1, 2014 - - B -

Kyiv (City of)

October 6, 2015 December 22, 2015 2.53 CC CCC+
LRG 18* January 21, 2016 - - NR -

Rio de Janeiro (State of)

September 19, 2016 - - BB -
LRG 19* September 20, 2018 November 5, 2018 1.51 B+ CCC-
LRG 20* December 19, 2018 March 1, 2019 2.37 - CCC-

Minas Gerais (State of)

February 25, 2019 - - B- -
LRG 21* March 21, 2019 September 4, 2020 17.51 B-

Buenos Aires (Province of)

May 15, 2020 September 6, 2021 15.74 B CCC+

Mendoza (Province of)

June 19, 2020 June 11, 2021 11.73 B CCC+

Province of Rio Negro

July 8, 2020 December 28, 2020 5.68 B CCC+

Salta (Province of)

August 7, 2020 February 25, 2021 6.64 B CCC+

Entre Rios (Province of)

September 8, 2020 March 18, 2021 6.28 B- CCC+

La Rioja (Province of)

September 24, 2020 September 29, 2021 12.16 B- CCC+

Neuquen (Province of)

November 26, 2020 December 9, 2020 0.43 B- CCC+

Cordoba (Province of)

January 11, 2021 January 27, 2021 0.53 B- CCC+

Jujuy (Province of)

March 22, 2021 March 23, 2021 0.03 CCC+ CCC+

Mostransavto

December 24, 2008 December 29, 2008 0.16 CCC+ CC
*Confidential rating. LRG--Local and regional government. SD--Selective default. NR--Not rated. Source: S&P Global Ratings Research.

Gini Ratios And Lorenz Curves

In addition to examining the absolute performance of LRG ratings, we also assess their relative performance. One technique we use to measure relative performance is the Gini coefficient, a key measure of the relative ability of ratings to differentiate risk.

The Gini coefficient is a summary statistic of the Lorenz curve, which is a graphical representation of the proportionality of a distribution. The Lorenz curve is built by plotting the cumulative proportion of issuers by rating category (from lowest to highest) against the cumulative proportion of defaulters by rating category (see chart 17). For example, if 'CCC' issuers represented 1% of the total issuers (x-axis) and 10% of the defaulters (y-axis), that would be the first point on the curve. A Gini coefficient of 1 indicates perfect rank ordering, and a Gini coefficient of zero means the rank ordering is random.

We believe comparing Lorenz curves and Gini coefficients is useful. Lorenz curves for IPF closely resemble the ideal Lorenz curves (see charts 7 and 18-20). For more detail regarding the derivation and construction of Lorenz curves and Gini coefficients, see "Gini coefficient calculation" in the appendix.

Chart 7 shows the one-year Lorenz curve for LRGs. The points along the Lorenz curve represent different ratings, starting with the 'CCC' and lower categories on the far left. The first point indicates the obligations rated 'CCC' and lower represent 36.67% of defaults within one year. As the ratings rise, the cumulative percentage of defaults for each rating increases in the 'B' category and then reaches 100% at the 'BB' rating. From that point, there are no defaults at higher ratings. The 2021 one-year Gini coefficient was 0.9 (90%).

Chart 7

image

Table 6 provides the coordinates in the Lorenz graph. The lowest value in the left column shows the cumulative proportion of defaults at the 'CCC' through 'C' categories, or 36.67%, and the number to the right is the cumulative proportion of the rated universe, 1.17%. This means 36.67% of the defaults came from just over 1% of the ratings, all of which were in the 'CCC' or lower categories. Moving up the table, once ratings reach 'BB', representing 19.17% of all ratings, 100% of defaults have occurred.

Table 6

LRG One-Year Lorenz Curve Values
(%) Cumulative proportion of defaults Cumulative proportion of rated universe
AAA 100.00 100.00
AA+ 100.00 89.51
AA 100.00 78.28
AA- 100.00 64.60
A+ 100.00 54.06
A 100.00 44.70
A- 100.00 40.18
BBB+ 100.00 36.64
BBB 100.00 33.82
BBB- 100.00 30.67
BB+ 100.00 25.26
BB 100.00 19.17
BB- 83.33 12.76
B+ 66.67 7.36
B 63.33 4.98
B- 63.33 2.84
CCC/C 36.67 1.17
Source: S&P Global Ratings Research.

LRG And Sovereign Ratings

Some LRG ratings are tied to sovereign ratings. LRG ratings may be capped at the sovereign rating, particularly if the LRG is not expected to maintain stronger credit characteristics than the sovereign in a stress scenario, does not have an institutional framework that is predictable and stable and limits the risk of negative sovereign intervention, and does not have the ability to mitigate intervention from the sovereign.

From the 'AA' category to 'BB', LRG ratings and sovereign ratings remain in those categories in almost the same proportions from one year to 15 years. However, LRG 'AAA' ratings are much more fluid than sovereign ratings at the highest level. After one year, 94.4% of LRG 'AAA' ratings maintain that rating, similar to 96.8% of sovereign ratings. By the 15th year, just 35.6% of the original 'AAA' LRGs maintain that rating, far below 67.1% of sovereigns (see chart 8).

For 'B' category ratings, 72% of LRGs remain in that category after one year, compared with 88% of sovereigns. By the 10th year, just 10.3% of 'B' category LRGs maintain that rating, compared with 41.7% of sovereigns (see chart 9). The steadily decreasing percentage for LRGs is largely the result of the withdrawal of ratings.

Chart 8

image

Chart 9

image

Rating Distributions

S&P Global Ratings rated 425 IPF entities at the start of 2022, up from a low of 10 in 1989 (see chart 10). After years of only about 12 active ratings per year, the rated IPF sector grew faster in 1993, reaching approximately 350 rated entities around 2004.

The first speculative-grade ratings in the sector at the start of a year were 'BB' and 'B', at the start of 1996. By the start of 2022, 86% of ratings were investment-grade. The highest percentage of speculative-grade ratings was at the start of 2008, when approximately 31% of the ratings were below 'BBB'.

Chart 10

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At the start of 2022, there were 25 'AAA' LRGs, down from a high of 35 at the start of 2012 (see chart 11). By far the largest share of LRG ratings are 'AA', at 43% of the total at the beginning of 2022. Speculative-grade issuers started the year at 20% of all LRGs, broadly consistent with the past two years.

Chart 11

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Although there are fewer rated non-LRGs than LRGs, the number of rated non-LRGs has been steadily increasing since 2015 (see chart 12). Within this subsector, credit quality remains high with most issuers rated investment-grade. The year with the lowest credit quality in non-LRGs was 2017, with investment-grade ratings at 93%. This percentage has moderately increased over time to reach 98% as of Jan. 1, 2022. The most common rating for non-LRGs is 'A', which represents 63%.

At the start of 2022, there were only five non-LRG 'AAA' ratings, down from a high of nine at the start of 2012. They were all on municipal funding agencies. Three of them are based in Nordic countries, namely KommuneKredit (Denmark), Kommuninvest i Sverige AB (Sweden), and the KBN Kommunalbanken Norway. The 'AAA' category also has the Municipal Finance Authority of British Columbia and the New Zealand Local Government Funding Agency.

Chart 12

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Regional Distribution

A plurality of IPF ratings are based in Western Europe (49%) (see chart 13), followed by Asia-Pacific and Canada, each with 16% of all IPF ratings. Most of these ratings (67%) are categorized as LRGs, followed by housing (located almost entirely in Western Europe) with 19%.

Chart 13

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Credit quality varies across regions (see chart 14). IPF ratings in Western Europe are 99% investment-grade, whereas Latin America is only 15% investment-grade. Canada has the highest proportion of 'AAA' ratings, with 14%, while only 3% of Asia-Pacific ratings are 'AAA'. Latin America and EEEMA do not have any 'AAA' ratings.

Chart 14

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The distribution of LRGs and non-LRGs varies among regions. Western Europe and Canada have a mix of both, while Asia-Pacific, Latin America, and EEMEA have very few non-LRGs (see charts 15 and 16).

For LRGs, Canada has the most 'AAA' ratings by percentage, with 20%, followed by Western Europe with 14% and Asia-Pacific with 1%. Latin America and EEMEA have no 'AAA' rated LRGs.

For non-LRGs, Western Europe and Canada have the largest populations by far, with 104 and 25, respectively, compared with six for Asia-Pacific, three for Latin America, and one for EEMEA.

Chart 15

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Chart 16

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Appendix I: Methodology And Definitions

This IPF default and rating transition study uses an internal database of long-term local currency issuer credit ratings. It covers LRGs and other IPF entities outside the U.S. and uses public and confidential ratings. For LRGs with national scale ratings only--mainly those in Mexico and Russia--we use the equivalent local currency rating in S&P Global Ratings' global scale. This study uses LRG issuer ratings and not the ratings on specific issues of debt by these governments. We do not make any adjustment for the size of the government or for the amount of debt issued by each government.

Our ongoing improvements to the database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. However, this poses no continuity problem because each study reports statistics back to Dec. 31, 1974. Therefore, each annual default study is self-contained and effectively supersedes all previous versions. There are no changes in methodology in this study from the IPF default and rating transition study of 2020, which was published last year. The inclusion of non-LRG ratings within IPF began in the 2017 study and continues this year.

Issuers included in this study

This study analyzes the rating histories of IPF entities that S&P Global Ratings rated as of Dec. 31, 1974, or that were first rated between that date and Dec. 31, 2021. This includes defaults on an LRG's commercial debt, including bank and bond debt. We have included both public and confidential ratings when tallying the number of defaults. Even if a rating was withdrawn in a particular year and the entity went on to default on commercial debt during that year or in a subsequent year, we included the default in our statistics for that year.

For confidential ratings, we preserve anonymity by referring to the entities, typically LRGs, as "LRG 1," "LRG 2," etc. When ratings are withdrawn at the request of a particular LRG, we indicate this by the abbreviation "NR," signifying that the LRG is not rated.

Issuers with withdrawn ratings

S&P Global Ratings withdraws ratings when an entity's entire debt is paid off or when the program or programs rated are terminated and the relevant debt extinguished. Others are withdrawn because of a lack of cooperation, particularly when an entity fails to provide all the information needed to continue surveillance on the ratings, or at the entity's request.

Definition of default

An obligor rated 'D' (default) or 'SD' (selective default) is in payment default on one or more of its financial obligations (rated or unrated) unless S&P Global Ratings believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. S&P Global Ratings also lowers a rating to 'D' when an issuer takes an action that could jeopardize payments on a financial obligation, including the rare instance of a public finance entity filing for bankruptcy.

A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. S&P Global Ratings assigns an 'SD' rating when it is believed that the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. A selective default includes the completion of a distressed exchange offer, whereby one or more financial obligations are either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

We deem 'D' and 'SD' ratings to be defaults for the purposes of this study. A default is assumed to take place on the earliest of the date the rating was revised to 'D' or 'SD', the date a debt payment was missed, the date a distressed exchange offer was announced, or the date the debtor filed for or was forced into bankruptcy. When an issuer defaults, it is not uncommon for the 'D' rating to be subsequently withdrawn. For the purposes of this study, if an issuer defaults, we end the obligor's rating history at 'D'. If any defaulting entity reemerges from bankruptcy or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment of all its debts, we reenter this obligor into the database as a new obligor. The rating history on the obligor after the default event is included in all calculations as entirely separate from the experience leading up to its earlier default.

Static pool methodology

We conduct our default studies on the basis of groupings called static pools. For the purposes of this study, we form static pools by grouping obligors by rating category at the beginning of each year, quarter, or month that the database covers. Each static pool is followed from that point forward. All issuer credit ratings included in the study are assigned to one or more static pools. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged.

We use the static pool methodology to avoid certain pitfalls in estimating default rates, such as by ensuring that default rates account for rating migration and can be calculated across multiple-period time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating, ignoring more recent rating changes that supply more current information. Other methods may calculate default rates using only the most recent year's default and rating data, which may yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity.

The pools are static in the sense that they remain constant over time. Each static pool can be interpreted as a buy-and-hold portfolio. Because errors, if any, are corrected by every new update and because the criteria for inclusion or exclusion of bonds in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Therefore, every update revises results to the same starting date of Dec. 31, 1974, so as to avoid continuity problems.

Ratings that have been withdrawn--that is, revised to not rated--are surveilled with the aim of capturing a potential default. Because static pools include only entities with active ratings as of the beginning date of a given pool, we exclude withdrawn ratings, as well as ratings on bonds that have defaulted, from subsequent static pools. If the rating on an entity's bond series is withdrawn after the start date of a particular static pool and there is a subsequent default, we will include that series in that static pool as a default and categorize it in the rating category of which it was a member at that time.

For instance, the 1975 static pool consists of all debt rated as of 12:00:01 a.m. on Jan. 1, 1975. Adding debt first rated in 1975 to the outstanding debt of the 1975 static pool forms the 1976 static pool. All rating changes that took place as of 12:00:01 a.m. on Jan. 1, 1976, are reflected in the newly formed 1976 static pool. We used the same method to form static pools for 1977-2021.

Consider the following example: A parity debt rating of 'BB' is assigned in mid-1986 and is lowered to 'B' in 1988, followed by a default in 1993. This hypothetical rating would be included in the 1987 and 1988 pools as 'BB' and in the 1989-1993 pools as 'B'. All pools that include this obligation would capture its 1993 default. It would not be part of the 1986 pool because it was not rated as of the first day of that year. Yet each of the pools in which this debt was included (1987-1993) would record its 1993 default at the appropriate time horizon.

Default rate calculations

We calculated annual default rates for each static pool, first in units and later as percentages with respect to the number of issuers in each rating category. We combined these percentages to obtain cumulative default rates for the 45 years the study covers (see tables 13 and 15-17).

Issuer-weighted default rates.  All default rates that appear in this study are based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings. Many practitioners use statistics from this default study to estimate "probability of default" and "probability of rating transition." It is important to note that our ratings do not imply a specific probability of default.

Average cumulative default rate calculation.  The cumulative default rates in this study average the experience of all static pools by first calculating marginal default rates for each possible time horizon and for each static pool, weight-averaging the marginal default rates conditional on survival (survivors being nondefaulters), and then accumulating the average conditional marginal default rates. We calculated conditional default rates by dividing the number of issuers in a static pool that defaulted at a specific time horizon by the number of debt issues that survived (did not default) to that point in time. Weights are based on the number of issues in each static pool. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters).

For instance, the weighted average first-year default rate for entities rated in the 'BB' category was 0.82%, meaning that an average of 99.2% made payments in accordance with their terms for the first year (see table 15). Similarly, the second- and third-year conditional marginal averages were 1.28% (98.6% of those parity obligations that did not default in the first year did not default in the second year) and 1.07% (99.1% of those entities that did not default by the second year did not default in the third year either), respectively. Multiplying 99.2% by 98.6% results in a 97.8% survival rate at the end of the second year, or a two-year cumulative average default rate of 2.18%. Multiplying 97.8% by 99.1% results in a 96.9% survival rate at the end of the third year, or a three-year cumulative average default rate of 3.1%. (The table is based on numbers calculated to four decimals. Calculations using numbers rounded to two decimals, as presented here, may yield slightly different results.)

Cumulative default rate calculation.  We use cumulative default rates to average the experience of all static pools in a select period by calculating marginal default rates for each possible time horizon and for each static pool. The marginal default rates are then turned into survival rates by subtracting the marginal default rates from 1. To get the cumulative default rates for a horizon, the survival rates for all previous horizons are multiplied and then subtracted from 1.

In the context of LRG ratings, we treat governments that selectively default as complete defaults. In this analysis, when the LRG emerges from selective default, we then treat it as a new entity altogether. At some point, the cumulative default rate stops increasing as the time horizon lengthens, because no additional defaults are captured by the longer horizon.

Cumulative default rates differ from transition-to-default rates in that defaults are counted only once, as opposed to averaging default observations, which we do when we calculate transition rates for periods longer than 24 months. In addition, we use all annual static pools in the period, not just the static pools that have enough years to complete the horizon.

Transition analysis

Transition rates compare issuer ratings at the beginning of a period with the ratings at the end of the period. To compute one-year rating transition rates by rating category, we compared the rating on each parity obligation at the end of a particular year with the rating at the beginning of the same year. An obligation that remained rated for more than one year was counted as many times as the number of years it was rated. For instance, an obligation continuously rated from the middle of 1987 to the middle of 1991 would appear in the four consecutive one-year transition matrices from 1988-1991. If the rating on the obligation was withdrawn in the middle of 1991, it would be included in the column representing transitions to not rated in the 1991 transition matrix. Similarly, if it defaulted in the middle of 1991, it would be included in the column representing transitions to 'D' in the 1991 one-year transition matrix.

All 1974 static pool members still rated on Jan. 1, 2022, had 46 one-year transitions, while those first rated on Jan. 1, 2021, had only one. Longer time horizons, of three or more years, have fewer transitions. Various tables in this report display the transitions for international LRG ratings over several time horizons. Each transition matrix displays all rating movements between letter categories from the beginning of the period through the end.

The only ratings considered in these calculations are those on entities at the beginning of each static pool and those at the end. All rating changes that occur in between are ignored. For example, if an entity was rated 'A' on Jan. 1, 2021, and was downgraded to 'BBB' in the middle of the year and then upgraded to 'A' later in the year (with no other subsequent rating changes), this entity would be included only in the percentage of issuers that began the year as 'A' that ended the year as 'A'. This also applies to transition matrices that span longer time horizons. If an obligation defaults or the rating is withdrawn in the middle of the year, then we consider it to be either rated 'D' or not rated as of Dec. 31 of that particular year.

Multiyear transitions.  Multiyear transitions were also calculated for periods of two to 20 years. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. For example, five-year transition matrices were the result of comparing ratings at the beginning of the years 1974-2018 with the ratings at the end of the years 1979-2020. Otherwise, the methodology was identical to that used for single-year transitions. We calculated average transition matrices on the basis of the multiyear matrices just described. These average matrices are a true summary, the ratios of which represent the historical incidence of the ratings listed in the first column changing to the ones listed in the top row over the course of the multiyear period.

Transition matrices that present averages over multiple time horizons are also calculated as issuer-weighted averages.

Comparing transition rates with default rates.  Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. For example, the one-year default rate column of table 2 is equivalent to the one-year column in table 4.

Initial-to-last transition and default rates.  These transition rates compare debt ratings from the time of first rating to the last rating, regardless of the time elapsed in the interim. They provide a road map to all of the historically observed ratings held by non-U.S. LRGs during their lifetimes.

Gini coefficient calculations

The Gini coefficient, developed by Corrado Gini, is a summary statistic of the Lorenz curve and shows the accuracy of ratings' rank ordering. The Lorenz curve was developed by Max O. Lorenz as a graphical representation of the proportionality of a distribution. For this study, the Lorenz curve is built by plotting the cumulative proportion of parity obligations by rating category (from lowest to highest) with the cumulative proportion of defaulters by rating category. For example, if 'C' parity obligations represented 1% of the total parity obligations (x-axis) and 20% of the defaulters (y-axis), then the coordinate (1, 20) would be the first point on the curve.

Chart 17

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To determine the relative performance represented by the Lorenz curve, we compare it with the random curve and the ideal curve. If the ratings' rank ordering only randomly approximated default risk, the Lorenz curve would fall along the diagonal, and its Gini coefficient would be zero.

If ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated obligations and all obligations with the lowest rating defaulted, the curve would be the ideal curve, and the Gini coefficient would be 1.

The Gini coefficient is a ratio of two areas, as illustrated in chart 17, and is derived by dividing area B by the total area A plus area B. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario and approaches the ideal.

The Gini coefficient can be calculated for different lengths of time--for example, one year or three years; or for a single period, such as the year ended 2021; or by aggregating a series of one-year periods. To calculate the one-year Gini for 2021, we identified the parity obligation ratings at the beginning of the year and determined which did and did not default during the year. Then we calculated the proportion of parity obligations at each rating and the proportion of defaulters at each rating, based on the ratings at the beginning of the period. The aggregate Gini for 1975-2021 combines data for each of the 46 one-year periods. The same parity obligation may be counted multiple times in the aggregate Gini coefficient.

Time samples

This update limits the reporting of default rates to the 15-year time horizon. However, the data were gathered for 46 years, and all calculations are based on the rating experience of that period. In addition, average default statistics become less reliable at longer time horizons as the sample size becomes smaller and the cyclical nature of default rates has a bigger effect on averages.

Default patterns share broad similarities across all static pools, suggesting that S&P Global Ratings' rating standards have been consistent over time. Adverse conditions tend to coincide with default upswings for all pools. Speculative-grade issuers have been hit the hardest by these upswings, but investment-grade default rates also increase in stressful periods.

Table 7

Local And Regional Government Three-Year Rating Transitions Without Modifiers By Region (1975-2021)
(%) --Rating three years later--
Rating AAA AA A BBB BB B CCC/C D NR
Global
AAA 83.7 11.2 0.2 0.3 0.0 0.0 0.0 0.0 4.7
AA 3.3 81.8 5.1 1.1 0.1 0.0 0.0 0.0 8.5
A 0.0 12.7 66.5 5.8 0.3 0.0 0.0 0.0 14.7
BBB 0.0 0.0 9.3 59.9 9.1 0.6 0.0 0.3 20.9
BB 0.0 0.0 0.0 6.7 67.4 3.8 0.5 3.2 18.4
B 0.0 0.0 0.0 0.0 19.7 34.8 9.0 7.7 28.9
CCC/C 0.0 0.0 0.0 0.0 2.9 61.4 10.0 12.9 12.9
Canada
AAA 87.5 8.5 0.6 0.0 0.0 0.0 0.0 0.0 3.4
AA 3.1 92.4 2.7 0.0 0.0 0.0 0.0 0.0 1.7
A 0.0 17.4 76.9 0.9 0.0 0.0 0.0 0.0 4.8
BBB 0.0 0.0 50.0 33.3 0.0 0.0 0.0 0.0 16.7
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Asia-Pacific
AAA 83.6 11.4 0.0 0.0 0.0 0.0 0.0 0.0 5.0
AA 3.1 80.4 4.8 0.0 0.0 0.0 0.0 0.0 11.8
A 0.0 10.4 75.4 2.7 0.0 0.0 0.0 0.0 11.5
BBB 0.0 0.0 15.6 36.4 0.0 0.0 0.0 0.0 48.1
BB 0.0 0.0 0.0 0.0 15.8 0.0 0.0 0.0 84.2
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Latin America
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 66.5 17.7 2.0 0.0 1.0 12.8
BB 0.0 0.0 0.0 4.1 71.4 4.2 0.5 3.9 15.9
B 0.0 0.0 0.0 0.0 10.9 40.1 12.9 10.4 25.7
CCC/C 0.0 0.0 0.0 0.0 0.0 71.9 9.4 15.6 3.1
Western Europe
AAA 81.8 12.4 0.0 0.6 0.0 0.0 0.0 0.0 5.2
AA 3.5 78.0 6.2 1.8 0.2 0.0 0.0 0.0 10.3
A 0.0 10.4 56.7 10.0 0.6 0.0 0.0 0.0 22.4
BBB 0.0 0.0 12.3 60.5 4.9 0.0 0.0 0.0 22.2
BB 0.0 0.0 0.0 22.1 60.5 2.3 0.0 0.0 15.1
B 0.0 0.0 0.0 0.0 50.0 0.0 0.0 0.0 50.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EEMEA
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 14.8 66.7 7.4 0.0 0.0 0.0 0.0 11.1
BBB 0.0 0.0 11.3 65.0 13.8 0.0 0.0 0.0 10.0
BB 0.0 0.0 0.0 11.4 59.2 2.8 0.9 2.4 23.2
B 0.0 0.0 0.0 0.0 31.2 32.4 5.3 5.3 25.9
CCC/C 0.0 0.0 0.0 0.0 5.3 52.6 10.5 10.5 21.1
NR--Not rated. EEMEA--Eastern Europe, Middle East, and Africa. Source: S&P Global Ratings Research.

Table 8

Local And Regional Government Five-Year Rating Transitions Without Modifiers By Region (1975-2021)
(%) --Rating five years later--
Rating AAA AA A BBB BB B CCC/C D NR
Global
AAA 74.0 17.0 0.8 0.7 0.0 0.0 0.0 0.0 7.6
AA 5.6 72.0 7.1 1.9 0.3 0.0 0.0 0.0 13.2
A 0.0 18.3 49.9 8.4 0.2 0.1 0.0 0.0 23.1
BBB 0.0 0.0 12.4 44.8 12.4 0.9 0.2 0.9 28.4
BB 0.0 0.0 0.0 8.3 54.7 4.0 0.4 5.7 26.8
B 0.0 0.0 0.0 0.9 23.9 23.1 5.5 7.5 39.2
CCC/C 0.0 0.0 0.0 0.0 16.4 32.8 10.4 20.9 19.4
Canada
AAA 79.4 13.8 1.9 0.0 0.0 0.0 0.0 0.0 5.0
AA 5.3 87.1 4.4 0.0 0.0 0.0 0.0 0.0 3.3
A 0.0 28.3 62.2 1.5 0.0 0.0 0.0 0.0 8.0
BBB 0.0 0.0 83.3 0.0 0.0 0.0 0.0 0.0 16.7
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Asia-Pacific
AAA 73.9 17.9 0.0 0.0 0.0 0.0 0.0 0.0 8.2
AA 5.5 69.4 7.4 0.0 0.0 0.0 0.0 0.0 17.7
A 0.0 16.4 60.7 1.4 0.0 0.0 0.0 0.0 21.4
BBB 0.0 0.0 35.9 15.4 0.0 0.0 0.0 0.0 48.7
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Latin America
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 51.1 23.9 2.7 0.5 2.7 19.0
BB 0.0 0.0 0.0 5.1 59.0 5.0 0.5 7.1 23.4
B 0.0 0.0 0.0 0.0 16.0 31.3 9.8 7.4 35.6
CCC/C 0.0 0.0 0.0 0.0 0.0 48.3 13.8 27.6 10.3
Western Europe
AAA 71.2 18.2 0.6 1.3 0.0 0.0 0.0 0.0 8.6
AA 5.8 66.9 8.0 3.1 0.5 0.0 0.0 0.0 15.7
A 0.0 12.2 39.0 14.9 0.4 0.2 0.0 0.0 33.3
BBB 0.0 0.0 15.2 43.9 6.2 0.0 0.0 0.0 34.6
BB 0.0 0.0 0.0 28.2 46.2 1.3 0.0 0.0 24.4
B 0.0 0.0 0.0 0.0 66.7 0.0 0.0 0.0 33.3
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EEMEA
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 22.7 50.0 4.5 0.0 0.0 0.0 0.0 22.7
BBB 0.0 0.0 14.5 52.2 15.9 0.0 0.0 0.0 17.4
BB 0.0 0.0 0.0 13.3 43.6 1.5 0.0 3.1 38.5
B 0.0 0.0 0.0 1.8 32.9 17.4 1.8 8.4 37.7
CCC/C 0.0 0.0 0.0 0.0 28.9 21.1 7.9 15.8 26.3
NR--Not rated. EEMEA--Eastern Europe, Middle East, and Africa. Source: S&P Global Ratings Research.

Table 9

Local And Regional Government Average One-Year Transition Rates With Rating Modifiers (1975-2021)
(%) --Rating one year later--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 94.4 3.4 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5
AA+ 3.3 89.8 4.2 0.3 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2
AA 0.0 5.1 87.3 4.6 0.2 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.7
AA- 0.0 0.1 7.4 80.7 6.5 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.6
A+ 0.0 0.0 0.2 8.0 80.9 4.4 0.6 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.3
A 0.0 0.0 0.0 0.3 14.3 72.7 2.6 2.9 0.3 0.3 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 6.2
A- 0.0 0.0 0.0 0.0 0.8 13.6 76.9 3.7 0.8 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7
BBB+ 0.0 0.0 0.0 0.0 0.0 1.0 13.0 69.8 8.3 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.3
BBB 0.0 0.0 0.0 0.0 0.0 0.0 0.9 9.8 65.6 12.6 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.7
BBB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 10.3 72.1 6.5 1.6 0.3 0.0 0.0 0.0 0.0 0.0 8.7
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 7.2 74.5 7.9 1.7 0.0 0.2 0.2 0.0 0.0 7.5
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.8 74.6 6.2 0.0 0.0 0.2 0.2 1.1 6.9
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 8.1 72.9 4.3 0.3 0.8 1.1 1.4 10.6
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 15.4 53.1 10.5 3.7 0.0 0.6 14.2
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 13.7 53.4 13.0 6.2 0.0 11.6
B- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.5 20.2 37.7 14.0 7.0 10.5
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 26.3 52.5 13.8 7.5
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 10

Local And Regional Government Average Five-Year Transition Rates With Rating Modifiers (1975-2021)
(%) --Rating five years later--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 74.0 11.2 5.8 0.0 0.5 0.0 0.3 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.6
AA+ 14.8 59.0 11.3 2.6 1.1 0.7 0.2 0.2 0.2 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.0
AA 2.6 19.4 48.6 9.6 5.2 1.0 0.1 0.4 0.7 1.5 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 10.6
AA- 0.3 4.5 26.8 32.9 11.6 1.1 0.3 0.8 0.3 0.5 0.0 0.3 0.3 0.0 0.0 0.0 0.0 0.0 20.2
A+ 0.0 0.4 4.0 21.8 33.7 6.8 1.1 1.6 2.0 2.5 0.0 0.2 0.2 0.0 0.0 0.0 0.0 0.0 25.8
A 0.0 0.4 1.5 10.6 27.8 24.0 4.9 1.5 0.4 4.2 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 24.3
A- 0.0 0.0 0.0 4.1 10.2 20.9 33.2 12.8 2.0 3.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13.8
BBB+ 0.0 0.0 0.0 0.0 2.9 13.1 21.9 20.4 5.8 2.9 3.6 0.0 0.7 0.0 0.0 0.0 0.0 0.0 28.5
BBB 0.0 0.0 0.0 0.0 0.0 4.5 4.5 12.3 28.4 14.8 7.1 1.3 0.0 0.0 0.0 0.0 0.0 0.0 27.1
BBB- 0.0 0.0 0.0 0.0 0.3 0.0 2.0 6.8 12.9 26.8 12.9 3.4 2.0 0.3 1.0 0.3 0.3 1.7 29.2
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 3.9 15.6 30.6 13.6 6.7 1.7 0.3 0.0 0.0 5.3 22.2
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.5 1.6 19.1 32.5 9.6 3.0 0.0 0.8 0.8 5.2 26.0
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 6.9 14.4 30.4 4.1 0.6 1.9 0.3 6.9 32.9
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 0.8 5.3 11.4 12.1 5.3 9.8 7.6 0.8 3.8 42.4
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 6.7 17.6 9.2 5.9 10.1 5.0 1.7 42.9
B- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 2.1 4.2 9.4 8.3 10.4 2.1 12.5 19.8 30.2
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.5 4.5 7.5 6.0 14.9 11.9 10.4 20.9 19.4
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 11

Local And Regional Government Average 15-Year Transition Rates With Rating Modifiers (1975-2021)
(%) --Rating 15 years later--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 35.5 28.2 19.3 0.3 2.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.0
AA+ 25.4 11.8 16.9 8.1 1.5 1.8 1.1 1.5 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.6
AA 10.1 22.4 15.3 5.3 3.0 3.0 1.3 4.0 1.8 2.8 0.0 0.0 0.3 0.5 0.0 0.0 0.0 0.8 29.6
AA- 4.1 16.6 14.5 6.4 7.6 1.5 0.6 4.1 4.4 4.9 0.0 3.2 0.6 0.0 0.0 0.0 0.0 0.0 31.7
A+ 0.8 11.0 16.3 11.4 11.4 1.6 0.0 0.0 2.0 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 41.6
A 4.4 3.6 3.6 18.2 6.6 6.6 8.0 3.6 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 44.5
A- 0.8 0.8 3.3 12.2 13.8 13.0 7.3 0.0 0.0 3.3 0.8 0.0 0.8 0.0 0.0 0.0 0.0 0.0 43.9
BBB+ 0.0 0.0 0.0 0.0 9.3 7.4 14.8 3.7 0.0 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 61.1
BBB 0.0 0.0 0.0 0.0 0.0 0.0 2.9 7.4 7.4 1.5 0.0 8.8 2.9 0.0 0.0 0.0 0.0 0.0 69.1
BBB- 0.0 0.0 0.0 0.0 0.9 0.0 0.9 9.0 7.2 15.3 9.9 4.5 1.8 0.9 0.0 0.0 0.0 0.0 49.5
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.4 14.2 11.3 8.5 3.8 1.9 0.0 0.0 0.0 26.4 23.6
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.4 8.4 8.4 11.7 7.3 0.6 5.0 1.7 0.0 13.4 40.2
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.9 3.4 8.6 0.9 0.9 1.7 0.0 0.0 19.0 62.9
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 9.6 17.3 5.8 0.0 0.0 0.0 1.9 11.5 51.9
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 1.9 7.5 1.9 13.2 0.0 0.0 0.0 1.9 5.7 66.0
B- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 26.9 3.8 0.0 0.0 0.0 0.0 3.8 23.1 42.3
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.4 14.8 18.5 14.8 0.0 0.0 3.7 7.4 0.0 18.5 14.8
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 12

Local And Regional Government 2021 Transition Matrix With Rating Modifiers
(%) --Rating one year later--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 96.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA+ 2.4 97.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 10.7 83.9 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.6
AA- 0.0 0.0 4.3 91.3 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A+ 0.0 0.0 0.0 5.0 90.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 25.0 58.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 16.7
A- 0.0 0.0 0.0 0.0 8.3 50.0 41.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB+ 0.0 0.0 0.0 0.0 0.0 0.0 40.0 60.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 0.0 0.0 0.0 7.7 15.4 53.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 23.1
BBB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.1 77.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.1
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 88.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.1
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 86.7 6.7 0.0 0.0 0.0 0.0 0.0 6.7
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 76.9 0.0 0.0 0.0 0.0 0.0 23.1
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.0 60.0 0.0 0.0 0.0 20.0
B- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 71.4 28.6 0.0
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 13

Local And Regional Government Cumulative Yearly Average Default Rates With Rating Modifiers (1975-2021)
(%) --Time horizon (years)--
Rating 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.4 0.6 0.6 0.6
AA- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB- 0.0 0.3 0.6 0.9 1.6 2.3 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
BB+ 0.0 0.5 1.8 3.3 5.0 6.2 7.5 9.7 11.6 12.9 14.3 15.4 15.4 15.4 15.4
BB 1.1 2.6 3.3 4.1 4.6 5.8 6.7 7.0 7.7 8.8 9.6 10.4 10.4 10.4 10.4
BB- 1.4 3.3 4.5 5.7 6.3 7.0 7.7 8.9 10.1 10.5 10.5 10.5 10.5 10.5 10.5
B+ 0.6 0.6 3.9 5.3 6.8 6.8 7.6 8.5 8.5 9.4 9.4 9.4 13.0 18.5 18.5
B 0.0 6.4 10.0 10.0 10.0 10.8 11.6 11.6 15.1 18.7 20.7 21.8 23.0 23.0 23.0
B- 7.0 10.6 15.2 24.5 26.4 28.4 28.4 32.9 34.2 34.2 38.8 46.0 48.2 48.2 50.6
CCC/C 13.8 16.4 16.4 16.4 24.9 33.6 41.3 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1
Investment-grade 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3
Speculative-grade 1.7 3.5 5.2 6.8 8.2 9.5 10.7 12.0 13.3 14.4 15.4 16.4 17.1 17.7 17.8
All rated 0.4 0.9 1.4 1.8 2.2 2.6 2.9 3.3 3.6 3.9 4.2 4.4 4.6 4.8 4.8
Calculated by multiplying nondefault marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 14

Local And Regional Government Cumulative Average Default Rates With Rating Modifiers (1975-2021)
(%) --Time horizon (months)--
Rating 1 2 3 4 5 6 7 8 9 10 11 12
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BB 0.0 0.1 0.1 0.2 0.3 0.4 0.4 0.5 0.6 0.7 0.8 0.9
BB- 0.1 0.1 0.2 0.3 0.4 0.5 0.6 0.8 0.9 1.1 1.3 1.4
B+ 0.0 0.1 0.1 0.2 0.2 0.4 0.6 0.8 1.0 1.0 1.1 1.2
B 0.0 0.0 0.0 0.0 0.0 0.2 0.3 0.4 0.4 0.6 0.9 1.2
B- 0.3 0.5 0.8 1.3 1.7 2.0 2.5 3.2 4.0 4.7 5.3 5.7
CCC/C 2.0 3.8 5.4 6.9 8.6 9.8 10.7 11.3 11.8 12.3 12.9 13.3
Investment-grade 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Speculative-grade 0.1 0.3 0.4 0.5 0.7 0.8 1.0 1.1 1.3 1.4 1.6 1.8
All rated 0.0 0.1 0.1 0.1 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.4
Calculated by multiplying nondefault marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 15

Local And Regional Government Local Currency 'BB' Static Pools And Default Rates
Transition-to-default rates
(%) --Time horizon (years)--
Static pools Issuers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1/1/1996 1 0.0 0.0 0.0 0.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
1/1/1997 8 0.0 0.0 0.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
1/1/1998 4 0.0 25.0 25.0 50.0 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5
1/1/1999 4 0.0 0.0 50.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0
1/1/2000 26 0.0 50.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0
1/1/2001 32 7.7 15.4 15.4 15.4 15.4 15.4 15.4 15.4 15.4 19.2 19.2 30.8 30.8 30.8 30.8
1/1/2002 48 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.1 3.1 15.6 18.8 18.8 18.8 18.8
1/1/2003 58 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 2.1 12.5 14.6 14.6 14.6 14.6 14.6
1/1/2004 68 0.0 0.0 0.0 0.0 0.0 0.0 1.7 1.7 13.8 15.5 15.5 15.5 15.5 15.5 15.5
1/1/2005 71 0.0 0.0 0.0 1.5 1.5 2.9 2.9 13.2 14.7 14.7 14.7 14.7 14.7 14.7 14.7
1/1/2006 80 0.0 0.0 1.4 1.4 2.8 2.8 12.7 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1
1/1/2007 88 0.0 1.3 1.3 2.5 2.5 11.3 12.5 12.5 13.8 13.8 13.8 13.8 13.8 13.8 13.8
1/1/2008 76 1.1 1.1 2.3 2.3 9.1 10.2 10.2 11.4 11.4 11.4 11.4 11.4 11.4 11.4
1/1/2009 73 0.0 1.3 1.3 9.2 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5
1/1/2010 65 1.4 1.4 9.6 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0
1/1/2011 63 0.0 7.7 9.2 9.2 9.2 9.2 9.2 9.2 9.2 9.2 9.2
1/1/2012 56 6.3 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5
1/1/2013 51 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8
1/1/2014 53 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2015 62 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2016 57 1.6 1.6 1.6 3.2 3.2 3.2
1/1/2017 50 0.0 0.0 0.0 0.0 0.0
1/1/2018 49 0.0 0.0 0.0 0.0
1/1/2019 41 0.0 0.0 0.0
1/1/2020 37 0.0 0.0
1/1/2021 34 0.0
Cumulative default rate* 0.8 2.1 3.1 4.3 5.3 6.3 7.3 8.5 9.7 10.6 11.4 12.0 12.0 12.0 12.0
Summary statistics
Marginal average 0.8 1.3 1.1 1.2 1.0 1.1 1.0 1.3 1.4 1.0 0.8 0.7 0.0 0.0 0.0
Cumulative average 0.8 2.1 3.1 4.3 5.3 6.3 7.3 8.5 9.7 10.6 11.4 12.0 12.0 12.0 12.0
Standard deviation 1.9 11.2 18.1 22.7 30.1 34.7 35.0 34.9 34.6 34.3 34.2 34.2 34.7 35.0 35.3
Median 0.0 0.0 1.3 1.8 3.0 9.5 10.4 11.4 13.8 14.1 15.1 15.5 17.1 18.8 24.8
Minimum 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.8 3.1 9.2 10.5 10.5 11.4 13.8
Maximum 7.7 50.0 75.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
*Calculated by multiplying nondefault marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 16

Local And Regional Government Local Currency 'B' Static Pools And Default Rates
Transition-to-default rates
(%) --Time horizon (years)--
Static pools Issuers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1/1/1996 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/1997 2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/1998 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/1999 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2000 7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2001 8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2002 12 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2003 21 0.0 0.0 0.0 0.0 0.0 8.3 8.3 8.3 8.3 8.3 8.3 8.3 16.7 16.7 16.7
1/1/2004 25 0.0 0.0 0.0 0.0 4.8 9.5 9.5 9.5 9.5 9.5 9.5 14.3 14.3 14.3 14.3
1/1/2005 27 0.0 0.0 0.0 0.0 4.0 4.0 4.0 4.0 4.0 4.0 8.0 8.0 8.0 8.0 8.0
1/1/2006 25 0.0 0.0 0.0 3.7 3.7 3.7 3.7 3.7 3.7 7.4 7.4 7.4 7.4 7.4 11.1
1/1/2007 27 0.0 0.0 4.0 4.0 4.0 4.0 4.0 8.0 8.0 8.0 8.0 8.0 8.0 20.0 20.0
1/1/2008 27 0.0 3.7 7.4 7.4 11.1 11.1 14.8 14.8 14.8 14.8 14.8 14.8 25.9 29.6
1/1/2009 28 0.0 3.7 3.7 7.4 7.4 11.1 14.8 14.8 14.8 14.8 14.8 25.9 29.6
1/1/2010 28 0.0 0.0 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 14.3 17.9
1/1/2011 20 0.0 0.0 0.0 3.6 3.6 3.6 3.6 3.6 3.6 14.3 17.9
1/1/2012 21 0.0 0.0 5.0 10.0 10.0 10.0 10.0 10.0 30.0 35.0
1/1/2013 18 4.8 9.5 14.3 14.3 14.3 14.3 14.3 33.3 38.1
1/1/2014 14 5.6 11.1 11.1 11.1 11.1 11.1 11.1 11.1
1/1/2015 13 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2016 20 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2017 23 0.0 0.0 5.0 35.0 40.0
1/1/2018 21 4.3 8.7 39.1 47.8
1/1/2019 19 0.0 33.3 42.9
1/1/2020 12 31.6 36.8
1/1/2021 12 0.0
Cumulative default rate* 2.1 5.3 9.1 12.2 13.3 14.1 14.7 16.3 17.9 19.6 21.4 23.5 25.8 27.9 28.6
Summary statistics
Marginal average 2.1 3.2 4.0 3.4 1.2 1.0 0.7 1.8 2.0 2.1 2.3 2.6 3.0 2.9 0.9
Cumulative average 2.1 5.3 9.1 12.2 13.3 14.1 14.7 16.3 17.9 19.6 21.4 23.5 25.8 27.9 28.6
Standard deviation 6.3 9.8 11.6 12.0 8.9 4.9 5.5 8.3 10.9 9.1 6.5 8.2 10.2 9.9 7.7
Median 0.0 0.0 0.0 0.0 3.6 3.6 3.6 3.7 3.6 4.0 7.7 7.4 3.7 0.0 0.0
Minimum 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Maximum 31.6 36.8 42.9 47.8 40.0 14.3 14.8 33.3 38.1 35.0 17.9 25.9 29.6 29.6 20.0
*Calculated by multiplying nondefault marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 17

Local And Regional Government Local Currency 'CCC'/'CC' Static Pools And Default Rates
Transition-to-default rates (%) --Time horizon (years)--
Static pools Issuers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1/1/1999 5 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7
1/1/2000 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2001 7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2002 2 28.6 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9
1/1/2003 1 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0
1/1/2004 2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2005 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2006 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2007 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2008 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2009 7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
1/1/2010 3 14.3 14.3 14.3 14.3 28.6 42.9 42.9 42.9 42.9 42.9 42.9 42.9
1/1/2011 1 0.0 0.0 0.0 0.0 33.3 33.3 33.3 33.3 33.3 33.3 33.3
1/1/2012 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2013 7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2014 11 0.0 0.0 0.0 0.0 0.0 0.0 57.1 71.4
1/1/2015 8 9.1 9.1 9.1 9.1 9.1 45.5 54.5
1/1/2016 1 0.0 0.0 0.0 0.0 50.0 62.5
1/1/2017 1 0.0 0.0 0.0 0.0 0.0
1/1/2018 2 0 0 0 0
1/1/2019 3 50 50 50
1/1/2020 7 33.3 66.7
1/1/2021 12 28.6
Cumulative default rate* 13.8 16.4 16.4 16.4 24.9 33.6 41.3 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1
Summary statistics
Marginal average 13.8 3.1 0.0 0.0 10.2 11.5 11.6 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cumulative average 13.8 16.4 16.4 16.4 24.9 33.6 41.3 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1
Standard deviation 24.8 27.9 26.1 25.3 27.3 29.6 30.1 31.3 29.4 30.0 30.7 31.8 32.6 19.5 20.3
Median 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Minimum 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Maximum 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 50.0
*Calculated by multiplying nondefault marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 18

Local And Regional Government Versus Sovereign Foreign Currency Default Rates (1975-2021)
--One-year-- --Three-year-- --Five-year-- --10-year-- --15-year--
(%) LRG Sov LRG Sov LRG Sov LRG Sov LRG Sov
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0
A 0.0 0.0 0.0 0.2 0.0 0.8 0.0 3.0 0.0 6.0
BBB 0.0 0.0 0.2 1.1 0.6 2.9 0.5 5.8 0.0 7.7
BB 0.8 0.4 8.5 1.8 17.7 3.4 32.8 9.2 44.6 14.5
B 1.8 1.9 5.7 8.4 5.3 13.8 7.0 24.9 5.8 37.5
CCC/CC 15.7 38.4 14.9 54.8 19.4 64.7 23.8 61.8 13.7 63.9
Investment-grade 0.0 0.0 0.0 0.2 0.1 0.6 0.0 1.4 0.0 1.9
Speculative-grade 2.0 2.1 6.9 5.5 12.2 8.2 21.4 13.9 27.5 23.0
All rated 0.2 0.7 0.7 1.9 1.0 2.9 1.5 4.7 1.3 5.3
Implied senior debt rating through 1995; sovereign credit ratings thereafter. Source: S&P Global Ratings Research.

Table 19

Local And Regional Government Versus Sovereign Foreign Currency Ratings Default Rates With Rating Modifiers (1975-2021)
--One-year-- --Three-year-- --Five-year-- --10-year-- --15-year--
(%) LRG Sov LRG Sov LRG Sov LRG Sov LRG Sov
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0
AA- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A+ 0.0 0.0 0.0 0.0 0.0 1.1 0.0 2.0 0.0 2.6
A 0.0 0.0 0.0 0.3 0.0 0.9 0.0 6.0 0.0 10.8
A- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.7
BBB+ 0.0 0.0 0.0 0.8 0.0 0.9 0.0 2.4 0.0 4.2
BBB 0.0 0.0 0.0 1.5 0.0 3.4 0.0 4.7 0.0 6.0
BBB- 0.0 0.0 0.3 0.8 1.1 2.8 0.8 7.3 0.0 8.7
BB+ 0.0 0.0 1.1 1.2 8.0 1.3 25.8 6.0 37.9 12.9
BB 1.0 0.0 12.0 0.9 18.9 1.6 28.5 3.5 40.3 16.9
BB- 1.6 1.8 9.3 4.7 14.3 9.3 22.1 26.9 29.0 31.5
B+ 0.3 0.0 2.1 5.2 2.4 10.2 4.7 22.9 5.7 36.3
B 0.0 1.5 6.9 6.8 1.2 12.7 6.1 23.1 4.0 31.2
B- 4.0 6.8 14.4 18.8 21.2 23.0 24.2 31.0 29.5 24.4
CCC/CC 15.7 38.4 14.9 54.8 19.4 64.7 23.8 61.8 13.7 63.9
Investment-grade 0.0 0.0 0.0 0.2 0.1 0.6 0.0 1.4 0.0 1.9
Speculative-grade 2.0 2.1 6.9 5.5 12.2 8.2 21.4 13.9 27.5 23.0
All rated 0.2 0.7 0.7 1.9 1.0 2.9 1.5 4.7 1.3 5.3
Implied senior debt rating through 1995; sovereign credit ratings thereafter. Source: S&P Global Ratings Research.

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This report does not constitute a rating action.

Ratings Performance Analytics:Nicholas W Kraemer, FRM, New York + 1 (212) 438 1698;
nick.kraemer@spglobal.com
Credit Markets Research:Luca Rossi, Associate Director, Paris;
luca.rossi@spglobal.com
Research Contributor:Nivedita Daiya, Pune;
nivedita.daiya@spglobal.com

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