Stable Credit Spreads in North America, Tighter Spreads in Europe

Economic Recovery Could Last Longer Than Normal

     New York, NY – Deep into an economic cycle that began in 2009, respondents to the latest quarterly IACPM Credit Outlook Survey forecast continuing stable credit spreads in North America over the next three months and called for tighter spreads in Europe. The IACPM Credit Outlook Index for North American investment grade debt in the latest reading is 0.0, while the High Yield Index is a barely positive 2.3. The Index for European investment grade debt is positive15.8 and the Index for European high yield debt is 18.4.

Some survey respondents noted that, while the current economic recovery is five years old, the expansion has been muted and therefore could last longer than the average cycle.

“We’re certainly seeing signs of strength, payroll numbers are consistently better, new home construction has improved, but the pace of recovery has been so gradual over the last several years, there’s growing sentiment that the upturn could last for a continued period of time,” commented Som-lok Leung, Executive Director of the IACPM.

To be sure, survey respondents are mindful of potential risks. A somewhat larger number of respondents in the latest survey expect credit defaults to rise over the next 12 months compared to the last survey taken at the beginning of April. The IACPM Credit Default Index is negative -18.6 in the latest survey compared to negative -14.6 in the previous survey.

“The big unknown continues to be how long the recovery will last,” noted Mr. Leung. “The grind towards tighter credit spreads continues but market participants understand the recovery is getting long in the tooth and they’re keeping an optimistic but cautious eye out for the future.

”The results for European credit, which are modestly more positive than North America, are somewhat surprising. As noted, the outlook for spreads continues to be positive, while the outlook for defaults among corporate credits is 0.0, or neutral, meaning as many survey respondents think defaults will drop as believe they will rise. Europe continues to face significant headwinds, however, and only time will tell whether the region’s various political and economic issues are successfully resolved. For the time being, however, financial markets appear to be taking a benign view.

The credit outlook survey is conducted among members of the International Association of Credit Portfolio Managers, which is an association of credit portfolio managers at 98 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 98 member institutions located in 17 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.