Survey Respondents in Latest IACPM Credit Outlook Survey Forecast Worsening Credit Conditions in Europe Post-Brexit

But Also Expect More Difficult Conditions In The Rest Of The World

     New York, NY – Respondents to the latest IACPM Credit Outlook Survey acknowledge the general expectation for worsening credit conditions in Europe following the British vote to leave the European Union but they also are forecasting more difficult conditions around the rest of the world, including North America and Asia, even though they do not see a direct link between Brexit and other parts of the globe. Sixty eight percent of survey respondents expect defaults to rise in European corporate debt over the next 12 months but, at the same time, 59% also expect North American corporate debt defaults to increase. Sixty percent believe Asian corporate debt defaults will rise.

“Survey respondents do not believe Brexit will have a direct impact on North America or elsewhere outside of Europe,” said Som-lok Leung, Executive Director of the International Association for Credit Portfolio Managers. “However, the current economic cycle is historically long in the tooth and the negative factors that have been in place for some time, such as slowing growth in China and continuing troubles in the energy patch, are still in place.”

To be sure, survey respondents are paying close attention to political ramifications from Brexit, including the possibility other countries, such as Austria and the Netherlands, will seek to leave the EU, but they also have their eyes firmly focused on global central banks and their potential actions. The U.S. Federal Reserve has hinted for some time it is close to raising interest rates but has held off thus far, partly in response to Brexit. Among other considerations, the Fed could be worried about the effect of rising U.S. interest rates on the British pound and other currencies. Instead, ten year U.S. Treasury yields have fallen to record lows and negative interest rates are at least a possibility.

“In some ways, ultra-low interest rates are as troublesome as Brexit,” commented Mr. Leung. “They put tremendous pressure on a range of credit market participants, including investors, such as pension funds, looking for acceptable returns and other market participants with long term and/or leveraged debt exposures.”

Given the uncertainty, survey respondents expect credit spreads to widen over the short term. The IACPM Credit Outlook score for North American investment grade debt over the next three months is minus -20.0, while the IACPM Credit Outlook score for European investment grade debt is negative -47.2.

The Credit Outlook Survey is conducted among members of the IACPM, which is an association of credit portfolio managers at more than 90 financial institutions located in 17 countries in the U.S., Europe, Asia, Africa and Australia. Members include portfolio managers at 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 end of each quarter.

Survey results are calculated as diffusion indexes, which show positive and negative values ranging from 100 to minus -100, as well as no change which is in the middle of the scale and is recorded as “0.0.” Positive numbers signify an expectation for improved credit conditions, specifically fewer defaults and narrower spreads, while negative numbers indicate an expectation of 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 more than 90 member institutions located in 17 countries, is a pro-fessional association dedicated to the advancement of credit portfolio management. Founded in 2001, the organization’s programs of meetings, studies, research and col-laboration are designed to increase awareness of the value and function of credit port-folio management among financial markets worldwide, and to discuss and resolve is-sues of common interest to its members.