Latest IACPM Credit Outlook Survey Reflects Global Uncertainty

Respondents are Divided Regarding Outlook for Credit Spreads and Defaults; Especially for Europe

     New York, NY – The latest IACPM Credit Outlook Survey taken at the end of June among members of the International Association of Credit Portfolio Managers reflects the global uncertainty regarding the outcome of the ongoing European sovereign credit crisis, as well as the outlook for the U.S. economy.  Respondents are just barely positive awarding a modest 12.2 index score for the possibility for tighter credit spreads over the next three months and even slimmer 7.1 index score for the prospects for fewer credit defaults over the next 12 months.

“No one knows for certain what will happen next and our members are clearly divided in their outlook,” commented Som-lok Leung, Executive Director of the IACPM.  “The European situation could be addressed or not.  Growth in the United States could pick up or not. We’re clearly at an inflection point.”

The outlook for Europe at this juncture appears considerably more perilous than the United States.  A sovereign or a banking system collapse in Europe could be cata-strophic and concern about this possibility can be seen in the survey’s results.  34 percent of respondents believe credit spreads will tighten for European investment grade credits, while 29 percent believe they will widen.  For the U.S., on the other hand, 40 percent of respondents think spreads will tighten, while only 18 percent think they will widen.

“For Europe, the possibilities are binary,” said Mr. Leung.  “If the crisis is some how addressed, our members believe the markets will respond positively.  If, on the other hand, the crisis is not addressed and there’s a default or a collapse, the results could be the unthinkable.”

The U.S., however, appears to be more of a growth story, with the main ques-tion being how little or how much growth will the country experience.  To be sure, the U.S. Congress and the Obama Administration are continuing to wrangle over raising the debt ceiling but survey respondents appear to be more concerned about the economy.  They remain optimistic about future prospects but not as much as they were last spring or especially last winter.  The outlook for fewer defaults among corporate credits dropped from an index reading of 53.0 in December to 30.7 in March to 15.6 in the latest survey taken in late June.  The outlook for defaults among consumers has also dropped from a score of 35.0 in December to 23.1 in March to just 2.5 in the new survey.

“The latest employment report underscores how tepid economic growth has be-come in the U.S.,” said Mr. Leung.  “Just 18,000 jobs were created in June which isn’t even enough to keep up with population growth.  Our members aren’t especially wor-ried about the debate over the debt ceiling but they are very concerned about growth and what the Federal Reserve might be willing to do in response.”

Survey respondents are members of the IACPM, which consists of credit portfolio managers at financial institutions in the U.S., Europe and Asia and include many of the world’s largest commercial banks, investment banks and insurance companies, as well as a number of asset managers.  Members are surveyed at the beginning of every quarter.

The results are calculated as diffusion indexes, which show positive and negative values ranging from 100 to -100, as well as no change which is in the middle of the scale and is recorded as “zero.”  Positive numbers signify an expectation for improve-ment in credit conditions, specifically fewer defaults and narrower spreads, while negative numbers indicate an expectation for deterioration with higher defaults and wider spreads.


Please click here to access a selection of aggregated survey data.

The full aggregated survey results will be published with a 6 months time lag in the members only section of our website. Please click here to access prior quarters’ survey results.


The IACPM, with 90 member institutions located in 17 countries, is a professional association dedicated to the advancement of credit portfolio management.  Founded in 2001, the organization’s programs of meetings, studies, research and collaboration are designed to increase awareness of the value and function of credit portfolio management among financial markets worldwide, and to discuss and resolve issues of common interest to its members.