Markets always send the signal of risk or euphoria first, either by launching or shrinking bond spreads respectively and long before rating agencies start one by one and slowly downgrade the credit rating of the country which is under consideration.
It is common for Big-Four Rating Companies – Fitch Ratings, Moody’s, Standard & Poor’s, DBRS – to reach the risks and prospects of countries reflected in government bond yields, coming several months after the first strong signs sent by markets.
by Trust Economics-https://trusteconomics.eu
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This shows us that rating agencies do not operate “proactively”, which would be more useful for their clients, i.e. large investors.
The gap between market perception and government assessments is common. Government bond ratings and yields do not reflect the same risks.
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Big Four ratings are based solely on a measure of the relative classification of credit risk (i.e. default), while bond yields reflect a broader combination of fundamental factors such as payment rates, inflation and exchange rate expectations, as well as liquidity and risk appetite conditions.
Bond yields may also be affected by the actions of the Central Bank of the country issuing government bonds (such as quantitative easing) by the government or regulators that change liquidity requirements or risk weighting of assets or by clearing companies that change security requirements.
