Credit Outlook Modestly Dims for North America

Latest IACPM Credit Outlook Survey Forecasts Rising Global Defaults As Outlook Modestly Dims For North America; Credit Spreads Expected To Widen In North America, Remain Unchanged In Europe

      New York, NY – Sentiment toward credit conditions in North America turned modestly more negative in the latest quarterly IACPM Credit Outlook Survey. Forecasters expect credit spreads to widen in North America over the next three months with an index score of minus -25.0 for investment grade debt and negative -37.5 for high yield debt. Survey respondents also think corporate defaults will increase in North America over the next 12 months with a score of minus -41.2 in the latest survey compared to negative -20.0 in the previous survey conducted last spring.

“Minus 41.2 versus minus 20 catches the eye but it’s important to bear in mind defaults are currently at a low level,” commented Som-lok Leung, Executive Director of the International Association of Credit Portfolio Managers. “Very few survey respondents think defaults are going to decline further. Indeed, 53% of respondents think defaults will remain at the same level, while 44% expect them to rise. Just three percent think defaults will decrease.”

One potential area of concern for North America is commercial real estate. Almost two thirds of survey respondents think defaults will increase in this sector in North America over the next 12 months, producing an index score of minus -60.0 compared to negative -27.0 in the previous reading.

“Survey respondents are keeping an eye on commercial real estate because of the potential spill over from structural changes in the retail sector,” noted Mr. Leung. “As brick and mortar stores close, shopping malls are impacted and any associated debt is more vulnerable.”

The credit outlook in Europe is somewhat brighter, although it is important to remember Europe is at earlier stage in the economic cycle than North America. The outlook for corporate defaults in Europe is minus -30.3, down from negative -38.9. Slightly more than half of survey respondents, 52%, think the default rate will remain unchanged over the next 12 months. The outlook for credit spreads is also fairly benign. The index score for European investment grade debt is a neutral 0.0, with just as many survey respondents, 28%, expecting spreads to tighten as expect them to widen.

“The results are a bit surprising, perhaps, because of Brexit and rumblings about other potential exits from the European Union,” said Mr. Leung. “But the UK economy has stayed on track since last year’s Brexit vote with strong employment and rising housing prices. There has also been an uptick in economic activity on continental Europe.”

The survey is conducted among members of the IACPM, an association of more than 90 financial institutions located in 21 countries around the world. 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 beginning 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 over 90 member institutions located in 21 countries, is a professional association dedicated to the advancement of credit portfolio management. The organization’s programs of meetings, studies, research and collaboration are designed to increase awareness of the value and the function of credit portfolio management among financial markets worldwide, and to discuss and resolve issues of common interest to its members.