Apologies for quoting an old post...
Quote:
Originally Posted by cal_guy
Alberta bond yields are actually 25 to 50 basis points lower than last year for debt 5 year and under bonds. Just to show you how useless ratings agencies are for government debt, Alberta bond yields are identical to Ontario and Quebec both of which have and S&P A+ rating.
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Absolute bond yields are irrelevant for assessing the impact of a ratings change.
What you need to look at is the relative change in yields between Alberta debt and other provinces. In other words, if Alberta debt was 5 bps lower than Ontario prior to the change, and is flat to Ontario after, then the impact was the 5 bps.
Your example does not show that ratings agencies are useless for government debt. What it shows is that the market - based on lots of factors, including supply, outlook, etc. - views Alberta debt as having essentially equal risk to Ontario's.
And that view is liquid. It is not the rating agency's mandate or desire to change ratings on a daily basis in a vain attempt to keep pace with minor changes in market sentiment.