Credit portfolio managers are split between those who believe corporate credit defaults will rise globally over the next 12 months and those who believe they will remain at current benign levels.
Among surveyed managers, 48% believe corporate defaults will increase globally over the next 12 months, while 47% believe they will stay at the same level, according to a fourth-quarter survey by the International Association of Credit Portfolio Managers.
The remaining 5% of surveyed managers believe defaults will fall during the next 12 months.
By region, managers are most pessimistic in North America, where 59% of surveyed managers believe corporate defaults will rise, compared with 55% for Europe, 38% for Asia and 30% for Australia.
While global financial markets face many sociopolitical challenges, including Iran, the trade war, Brexit and energy policies, immediate fears seem to have been set aside for now, said Som-lok Leung, IACPM's executive director, in a telephone interview.
"It is still fairly negative," Mr. Leung said. "There has been some change, but it hasn't been all that much, and the important thing is very few people think things are going to get better."
Mr. Leung added that those who believe defaults will remain the same believe so because the bottom "perpetually seems on the verge of dropping but doesn't."
"The case for staying the same is that there have been a couple of things that could have blown up, (but) they did not blow up, from Iran to the trade war," Mr. Leung said. "Things seem to be in a bit of a holding pattern. Also, central bank actions have helped keep things on an even keel."
The Aggregate Credit Default Outlook index for the next 12 months rose to -41.8 in the most recent survey, up from -56.2 in the previous quarter. A negative number indicates credit conditions are expected to worsen, while positive numbers mean conditions are expected to improve.
The index rose in every region, reflecting a slightly less negative outlook, but North America still has the lowest index at -56.8, up from -66.7 the previous quarter, while Europe rose a little more, to -51.5, also from -66.7.
The indexes for Asia and Australia rose to -34.6 and -20, respectively, from -57.7 and -34.6.
IACPM's Credit Spread Outlook index for the next three months overall fell to -33.6 in the most recent survey, which was conducted in the beginning of January, from -25 three months earlier and -38.4 a year ago.
The Credit Spread Outlook index for the next three months for North American investment-grade credit is -22.6 for the current quarter, down from -11.4 the prior quarter and the outlook index for North American high-yield credit rose to -36.7 from -42.9 the previous quarter. Europe's index plummeted to -34.6 from -12, and the Europe crossover index fell to -42.3 from -32.
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.