Outlook Survey Forecasts Wider Spreads and Rising Defaults

But Notable Differences Remain Between North America And Europe

     New York, NY – Credit portfolio managers responding to the latest IACPM Credit Outlook Survey believe credit spreads will widen over the next three months and defaults will increase over the next 12 months. The new survey released today shows overall negative scores of minus -18.8 for credit spreads and minus -36.3 for defaults.

At the same time, however, significant differences remain in the forecast for North America versus Europe. In North America, roughly half of respondents think short term credit spreads will remain unchanged, for example, 55% believe investment grade spreads will stay at current levels, while 48% think high yield spreads will remain unchanged. In terms of corporate defaults over the longer term, 36% of respondents think defaults will hold steady, while 53% believe they will increase.

”In the United States, we’re living in a period of easy credit and zero defaults,” commented Som-lok Leung, Executive Director of the International Association of Credit Portfolio Managers. “At some point, that has to change, with higher interest rates and rising defaults.”

In Europe, though, two thirds of survey respondents think corporate defaults will remain at current levels. Almost half of respondents, 48%, think investment grade spreads will also stay the same. This despite ongoing concerns over the future of Quantitative Easing, Brexit and, more recently, Catalonian demands for independence from Spain.

“There are certainly major concerns but Brexit, to take one issue, is a moving target and we’re not seeing much movement at the moment,” noted Mr. Leung. “At the same time, in terms of economic fundamentals, we’re seeing strong employment and wage growth, along with record low unemployment.”

IACPM survey respondents have forecasted worsening credit conditions for some time and no less an observer than newly minted Nobel prize winner economist Richard Thaler told Bloomberg last week “we seem to be living in the riskiest moment of our lives and yet the stock market seems to be napping.” Mr. Thaler says he does not understand it but one IACPM survey respondent thinks investors may simply be throwing in the towel after such a prolonged period of benign credit conditions.

The survey is conducted among members of the IACPM, an association of more than 90 financial institutions in over 20 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 more than 20 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.