First Quarter IACPM Credit Outlook Survey Forecasts Wider Credit Spreads

New York, NY – Respondents turned decidedly more negative in the latest quarterly IACPM Credit Outlook survey released today by the International Association of Credit Portfolio Managers. The survey, taken among members of the Association, indicate portfolio managers believe credit spreads will widen, as credit defaults increase. The IACPM Major Markets Credit Spread Outlook Index, which is a forecast of spreads for the next three months, stands at negative -19.0, which means more survey respondents believe spreads will widen than expect them to narrow. At the same time, the IACPM Aggregate Credit Default Outlook Index is negative -95.3, which means a vast majority of survey respondents believe defaults will increase over the next 12 months.

“One way to look at the results,” said Som-lok Leung, Executive Director of the IACPM, “is credit defaults are real events in the economy while credit spreads are the market’s pricing of that risk. In this case, survey respondents not only believe credit defaults will rise but also think the market will demand a greater return in the form of wider spreads.”

Respondents have consistently forecast increasing defaults over the last several surveys but the expectation of wider spreads this quarter is an abrupt reversal of a trend seen since last summer. The IACPM’s Credit Spread Outlook Index was a sharply negative -69.1 in June 2008, a considerably less negative -33.9 in September 2008 and actually a slightly positive 4.9 in December 2008 before reversing directions in the latest survey.

“Even as defaults were predicted to rise, the forecast for spreads was coming in,” said Mr. Leung. “Now, in this latest survey, we have a sea change with the risk of default and the expectation for pricing that risk finally heading in the same direction.”

The IACPM conducts its quarterly survey among 80 member firms located in 14 countries in Europe, North America, Asia, Australia and Africa. Membership includes credit portfolio managers at commercial and investment banks, insurance companies and asset managers. The Association began its quarterly surveys in December 2007 because its members value knowing how their colleagues are assessing risk as they make their own risk management decisions. The IACPM also publicly releases the results because it believes other market participants will benefit from the collective views of professional credit portfolio managers.

The surveys are calculated as diffusion indexes, which show positive and negative values from 100 to -100, as well as no change, which is recorded as zero. Positive values signify an expectation of improving conditions, such as tighter spreads, while negative values indicate an expectation of deteriorating conditions.

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 80 member institutions located in 14 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.