Credit Outlook Survey Forecasts More Difficult Credit Conditions

But Many Respondents Say Credit Spreads And Defaults Will Remain Unchanged

New York, NY – Survey respondents in the latest IACPM Credit Outlook Survey forecast rising defaults over the next 12 months and wider credit spreads over the next three months. The IACPM Credit Default Outlook Index is negative -31.3 in the latest reading, while the IACPM Credit Spread Outlook Index is minus -21.8. Both results imply deteriorating credit conditions.

At the same time, though, a large number of respondents believe conditions will generally remain the same. Fifty percent of respondents say credit defaults will stay at current levels over the next year, while 40% believe they will rise. Thirty nine percent of those surveyed think North American investment grade credit spreads will remain unchanged, as compared to 42% who believe spreads will widen.

“Certainly in the US, the economic recovery is getting long in the tooth and we’re beginning to see higher interest rates,” commented Som-lok Leung, Executive Director of the International Association of Credit Portfolio Managers. “But even so, rates remain historically low and the real question isn’t whether defaults will rise but rather at what rate. Our members don’t think defaults will soar.”

There is some concern, however, that a certain amount of complacency has settled into the financial markets. Respondents note credit spreads are tight and there is little or no risk premium, even while markets confront a number of challenging issues, including the outcome of the Brexit process, the upcoming French elections, uneven growth in Asia and uncertainty over future central bank activity.

“Despite all the challenges, there doesn’t seem to be any imminent catalyst for wider spreads or rising risk premia,” noted Mr. Leung. “There’s a whole list of potential problems but, so far, we’re managing to contain them.”

Respondents point out the latest readings are far less pronounced than those taken a year ago. While the latest default outlook is minus -31.3, last year at this time, the outlook was negative -56.2. Respondents say there is far less negativity in the current environment.

The 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 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. 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.