Most credit portfolio managers believe credit defaults will rise in the coming months, according to the third-quarter survey from the International Association of Credit Portfolio Managers.
The majority of surveyed credit managers, 73%, forecast rising loan defaults over the next 12 months globally. By region, 81% see defaults rising in Europe, 75% in North America, 65% in Australia and 56% in Asia.
The Aggregate Credit Default Outlook index for the next 12 months rose to -74.5 in the most recent survey, improving from -83.5 in the previous quarter. A negative number indicates credit conditions are expected to worsen, while positive numbers mean conditions are expected to improve.
Som-lok Leung, IACPM's executive director, said in a telephone interview that while the forecast remains negative, there's a growing sense that credit conditions are stabilizing.
"Things look bad, but I think the degree of badness is more understood," Mr. Leung said. "Less of an uncertainty is always helpful. It's not that things look better, but it's better understood what's happening."
The index rose slightly in every region, and Europe took over from North America as the region with the lowest index number at -81.1, up from -88.2 a quarter earlier. North America's index rose to -72.5 from -92.3. Australia rose to -65 from -77.3 and Asia rose to -55.6 from -63.0.
The majority of surveyed managers also believe credit spreads will widen over the next three months in all regions and categories.
Seventy-seven percent believe spreads will widen on high-yield debt in Europe, while 70% believe spreads will widen on North American high-yield debt.
On the investment-grade side, 60% believe spreads will widen on European debt and 55% on North American debt.
The survey is conducted among IACPM members, which consist of credit portfolio managers at more than 100 financial institutions in the U.S., Europe, Asia, Africa and Australia.