Credit portfolio managers are slightly pessimistic about credit conditions, although the full impact of higher inflation, rising interest rates and supply chain issues might not be seen until late in 2022, according to the fourth-quarter survey from the International Association of Credit Portfolio Managers.
When asked how corporate credit default rates will move over the course of the next 12 months, 43% said defaults will go down during that period. When asked the same question in the previous quarter's survey, 25% of surveyed managers said defaults would rise.
Som-lok Leung, IACPM's executive director, said in a phone interview that despite the more negative outlook, in terms of actual defaults, things are pretty benign in the short term.
However, Mr. Leung said, "it's hard for them to stay that way, given many central banks have signaled that rates will rise. I think there's an agreement that that will have an effect, not immediate, but coming later in the year."
Among the surveyed portfolio managers, 42% believe defaults will remain unchanged over the next 12 months, down from 59% in the previous quarter's survey, and 14% say they will go down, a small decrease from 16% in the previous survey.
The survey's Aggregate Credit Default Outlook index for the next 12 months dropped to -31.2 in the third-quarter survey, falling from -16.2 in the previous quarter. A negative number indicates credit conditions are expected to worsen, while positive numbers mean conditions are expected to improve.
By region, Australia's index dropped to -33.3 from -5.6 the previous quarter, Asia's number also fell to -33.3, a smaller drop from -17.4, North America fell to -21.2 from -14.7 and Europe dropped to -18.5 from -6.3.
The survey is conducted among IACPM members, who are credit portfolio managers at more than 100 financial institutions in the U.S., Europe, Asia, Africa and Australia.
