Strong Warning Flags Raised in Latest IACPM Credit Outlook Survey

Respondents Forecast Rising Defaults And Wider Spreads Citing Global Concerns Beyond Greece

      New York, NY – Respondents to the latest IACPM Credit Outlook Survey sent up clear warning signs, forecasting wider spreads and rising global defaults. The outlook for credit spreads was negative -45.2, while the outlook for defaults was minus -34.6. Both readings are strong signals respondents believe credit spreads will widen over the next three months, as credit defaults rise over the next 12 months. Further, respondents cited a litany of concerns, beyond merely Greece.

“In some ways, Greece has been the least of our concerns,” commented Som-lok Leung, Executive Director of the IACPM. “As painful as the crisis may be, certainly to Greek citizens, it doesn’t pose the same kind of threat to the global financial system that Lehman did in 2008. Survey respondents are far more worried today about the impact of potentially rising interest rates in the US and the economic and financial market turmoil in China.”

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 102 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 end of each quarter. The latest survey was conducted June 29 to July 7, during the midst of the Greek crisis.

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.

To be sure, the outlook for wider spreads in Europe is sharply different than the last reading at the end of the first quarter. The outlook for spreads on investment grade debt is negative -45.7 in the latest survey, compared to positive 23.1 three months ago. The outlook for high yield debt is minus -60.0, versus 20.5. At the same time, though, the outlook for wider spreads in North America is also more pronounced than the last reading. The outlook for investment grade debt is negative -36.8, compared to minus -11.4 last time, while the forecast for high yield debt is negative -39.5, versus minus -20.5.

“Greece is certainly producing some short term volatility but, longer term, survey respondents are focused on structural issues,” noted Mr. Leung. “Interest rates are at historic lows and the only direction from here is up. The only questions are when will interest rates rise and how far will they go.”

The looming threat of higher interest rates is reflected in the outlook for rising defaults, along with economic and market turmoil in Asia. No region of the world is spared in the latest survey. The outlook for defaults in North American corporate debt is negative -48.7. The forecast for European corporate debt is minus -30.6, for Asian corporate debt negative -56.5 and for Australian corporates, it is minus -29.4.

“It is interesting to note that the outlook for North American defaults is more pronounced than it is for Europe which, ultimately, is not surprising since the threat of rising interest rates in the US will have a significant impact on corporate debt, especially among oil and gas companies,” said Mr. Leung. “It is also not surprising that a majority of respondents are forecasting rising defaults in Asia, given the turmoil that is already underway in China.”


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 102 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.