Credit rating is a term that financial advisors might encounter regularly, especially when working with clients who are interested in bonds, government securities, or corporate debt. Canada's provinces are rated by major credit agencies, and these ratings have a direct impact on borrowing costs and investment opportunities.
In this article, Wealth Professional Canada will highlight what you need to know about credit ratings. We will also look at how the country and some of its provinces are currently rated.
A credit rating is an independent evaluation of a company or government's ability to repay a debt. It can refer to the general creditworthiness of an entity or to a specific financial obligation. Becoming knowledgeable about credit ratings is vital because these ratings help assess the risk involved in lending money to:
However, credit ratings are not guarantees. They are opinions based on the agency's analysis of available data. They do not replace the judgment of a financial advisor or portfolio manager. Instead, they serve as a reference point for assessing the risk associated with a particular bond, loan, or other debt instrument.
Credit ratings also influence the yields and prices of fixed-income instruments because they reflect the issuer's credit risk.
Credit ratings are assigned by independent companies known as credit rating agencies. The three most prominent agencies globally are:
In Canada, Morningstar DBRS is also a major player. These agencies analyze both qualitative and quantitative factors, including:
The result is a letter-grade rating that signals the likelihood that the issuer will meet its financial obligations in full and on time.
Credit rating agencies use a combination of internal and external information to evaluate an entity's creditworthiness. Internal sources include audited financial statements and annual reports, while external sources might be:
The agencies are not involved in the transactions themselves, which allows them to provide independent and impartial opinions. When assigning a rating, they look at several factors:
These factors help agencies compare one entity to another, making sure that ratings are consistent across similar issuers. For example, a province in Canada will be compared to other provinces with similar economic and fiscal profiles.
Credit ratings are divided into two main categories: investment grade and speculative grade. Investment grade ratings indicate that the issuer is likely to honor its repayment obligations and is considered a solid investment.
On the other hand, speculative grade ratings suggest higher risk and, as a result, higher interest rates to compensate investors for taking on that risk.
It is necessary to distinguish between a credit rating and a credit score. As mentioned above, credit rating applies to entities such as corporations and governments. It reflects the entity's ability to meet its financial obligations and is used by investors, intermediaries, and other businesses to assess risk.
On the contrary, credit scores are used for individuals. They measure personal credit health and are used by banks, credit card companies, and other lenders to decide whether to extend credit to a person and on what terms.
Credit ratings are assigned to corporations, provinces, and the federal government by various agencies. As for individual credit scores, they are calculated by credit bureaus like Equifax and TransUnion. They also usually range from 300 to 900.
According to 2025 ratings from Moody's, Morningstar DBRS, and S&P Global, Saskatchewan has the highest credit rating among Canadian provinces.
Moody's maintains its Aa1 rating, S&P affirms its AA rating, and Morningstar DBRS keeps its AA rating for Saskatchewan. All three agencies have assigned a stable outlook. This is a reflection of trust in the province's fiscal management and economic stability.
Saskatchewan's government has emphasized its commitment to effective governance and fiscal discipline. This includes meaningful debt prioritization and building up liquidity levels to withstand future shocks.
The province's approach has resulted in continued high ratings, which benefit both the government and investors by keeping borrowing costs low and signaling financial stability.
Other major provinces in Canada also have positive credit ratings, though there are some differences in the specific ratings and outlooks.
Alberta's credit ratings are strong, with Morningstar DBRS assigning an AA rating for both issuer and long-term debt, and R-1 for short-term debt.
S&P Global Ratings has affirmed Alberta's AA- long-term issuer credit and senior unsecured debt ratings, with an A-1+ short-term issuer credit rating. Both agencies have assigned a stable outlook.
Alberta's financial management, including prefunding efforts and maintaining small operating surpluses, has contributed to this stability. This has remained true even in the face of lower economic growth and oil prices.
Ontario's credit ratings for long-term debt are:
As for short-term ratings, Ontario's ratings are:
All agencies have assigned a stable outlook. Ontario's ratings reflect its capacity and willingness to pay interest and principal in a timely manner.
Quebec has an A+ rating from S&P and Aa2 from Moody's. The province also got an AA- from Fitch and AA from Morningstar DBRS. All agencies have assigned a stable outlook. These ratings indicate that Quebec is considered a reliable borrower, with a proven ability to meet its financial obligations.
British Columbia's ratings are also strong, though the outlook is currently negative from all major agencies. Moody's assigns an Aa1 long-term rating and P-1 short-term rating. S&P gives an A+ long-term and A-1 short-term rating.
Morningstar DBRS rates the province AA long-term and R-1 short-term, while Fitch assigns AA+ long-term and F1+ short-term. The negative outlook suggests that there are concerns about BC's future fiscal performance, but the ratings themselves remain high.
Canada is one of the few countries globally that hold AAA sovereign credit ratings from both S&P and Moody's. This is a mark of outstanding fiscal credibility and near-zero default risk. However, Canada has not always held this top-tier rating.
In the early 1990s, Canada lost its AAA rating due to persistent and sizable fiscal deficits and rising debt levels. It was only in the early 2000s that Canada regained its AAA status. This was after the country implemented fiscal reforms and improved its debt profile.
In 2019, Fitch warned that Canada's government debt was high compared to other AAA-rated countries and could threaten its top credit rating if deficits continue. However, the agency noted that current deficits were low and it expected the debt ratio to improve over time.
As of 2025, Canada holds a AAA sovereign credit rating from both S&P and Moody's. This places Canada in a highly select group of countries with the highest possible rating. Such rating can also indicate:
The country's rating benefits the government by allowing it to borrow at lower interest rates. It can also provide reassurance to investors considering Canadian government bonds.
The major credit agencies consider varying factors when assigning this rating. As mentioned earlier, these include fiscal strength, susceptibility to shocks, and others. Good performance in these factors has helped the country maintain its rating, even as global economic conditions remain uncertain.
Credit ratings are more than just numbers or letter grades—they reflect financial discipline and economic strength. Learning about credit ratings is vital for guiding clients through the fixed-income market and helping them make decisions that align with their goals and risk tolerance.
Canada's top-tier credit rating, along with the strong ratings of its provinces, is the result of years of responsible fiscal management and economic stability. These ratings influence borrowing costs, investment returns, and the overall confidence investors have in bonds and securities.
In a world where markets can shift quickly, credit ratings are a reliable benchmark for assessing the strength and stability of issuers.
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