Canada AAA Credit Ratings Affirmed by Fitch, Citing `Stronger' Performance
Canada’s AAA credit ratings were affirmed with a stable outlook by Fitch Ratings, which cited the country’s “comparably stronger economic and fiscal performance during the global financial crisis.”
The long-term foreign- and local-currency issuer default ratings, the agency’s highest, reflect the importance of “the structure and the soundness of the Canadian financial system” in preventing a more serious spillover of the crisis, Fitch said in a statement today.
“Canada’s sound macroeconomic policies, strong financial regulation and conservative banking practices, as well as responsible fiscal management, allowed it to skillfully weather the crisis and recover faster than any other G-7 economy,” Theresa Paiz Fredel, senior director in Fitch’s sovereign group in New York, said in the statement, referring to the Group of Seven advanced nations.
The Canadian dollar strengthened today, rising against all of its 16 most-traded counterparts, after the central bank raised the benchmark interest rate for a third time in less than four months and investors sought higher-yielding assets. It gained 1.1 percent to C$1.0370 per U.S. dollar. Canadian government bonds slumped, pushing up the yield on the two-year note as much as 14 basis points to 1.43 percent, the highest level since Aug. 17.
3.3 Percent Growth
Canada’s gross domestic product shrank 2.5 percent in 2009 compared with a median contraction of 3.5 percent for AAA rated sovereigns, Fitch said. The company said it expects the nation’s economy to expand by 3.3 percent in 2010, compared with a median forecast of 1.5 percent for AAA rated peers.
Sustained fiscal problems leading to increased borrowing -- “although not Fitch’s base-case scenario” -- could hurt the country’s rating over the medium term, the rating company said.
The Bank of Canada raised its target rate for overnight loans between commercial banks to 1 percent, from 0.75 percent, matching estimates from 14 of 20 economists surveyed by Bloomberg. While the country’s recovery will be “slightly” slower than it had projected because of a weaker outlook for the U.S. economy, inflation is in line with expectations, it said.
“Consumption growth is expected to remain solid and business investment to rise strongly,” the central bank said in a statement. “Both are being supported by accommodative credit conditions.”
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
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