The agency's view on the likely direction of a long-term rating over the medium term, stated alongside the rating itself.
Three values are in ordinary use:
- Positive — the rating may be raised.
- Stable — the rating is unlikely to move in either direction.
- Negative — the rating may be lowered.
An outlook of AA-/Stable is read as the rating followed by the directional view.
The horizon
The outlook covers a medium-term horizon — typically taken as one to two years, rather than the next quarter. It reflects the agency’s expectation given what it currently knows, and it is reviewed at each rating action.
What it does not commit the agency to
An outlook is not a promise of a future action. A Negative outlook does not mean a downgrade will follow; agencies routinely revise an outlook back to Stable without ever moving the rating. Equally, a rating can be downgraded directly from a Stable outlook where something unexpected happens — the outlook was a view, not a queue.
Read it as a statement about the balance of risks, and read the rating sensitivities section for the specific triggers. The sensitivities are where the agency states, usually with numbers, what would actually cause a move. The outlook is the summary; the sensitivities are the substance.
Where outlooks do not apply
Short-term ratings do not carry an outlook. The A1 to A4 scale used for commercial paper and short-term bank facilities has no outlook attached, because the instruments mature inside the horizon an outlook would describe.
A rating watch generally displaces an outlook. When a specific pending event is about to decide the question, a medium-term directional view is not meaningful and the watch takes its place.
Ratings in the default grades do not carry an outlook.
A practical note on aggregation
Outlook is a separate field from the rating, and a change of outlook is a rating action in its own right. A dataset that records only the symbol will show an outlook revision from Stable to Negative as no change, which is the wrong reading of a real event.
Related
- Rating watch — the event-driven flag that displaces an outlook
- Rating rationale — where the sensitivities behind the outlook sit
- Commercial paper — short-term paper, which carries no outlook
- Credit rating agencies in India — the long-term and short-term scales
- Glossary index