This paper examines whether credit rating agencies add value to the sovereign debt market. The authors argue that if ratings and spreads are both noisy signals of fundamentals, then ratings should add value if they help explain other variables after controlling for spreads. The study analyzes the actions of the three leading sovereign debt rating agencies and considers the effects of anticipated and unanticipated events. The results, based on a wide range of tests, consistently show that ratings do matter and that the market for ratings may be a public policy concern. The paper also finds that less anticipated rating changes have more significant effects. Overall, the findings suggest that rating agencies provide valuable information that is not fully captured by spreads, and their opinions should be taken into account in policy discussions.This paper examines whether credit rating agencies add value to the sovereign debt market. The authors argue that if ratings and spreads are both noisy signals of fundamentals, then ratings should add value if they help explain other variables after controlling for spreads. The study analyzes the actions of the three leading sovereign debt rating agencies and considers the effects of anticipated and unanticipated events. The results, based on a wide range of tests, consistently show that ratings do matter and that the market for ratings may be a public policy concern. The paper also finds that less anticipated rating changes have more significant effects. Overall, the findings suggest that rating agencies provide valuable information that is not fully captured by spreads, and their opinions should be taken into account in policy discussions.