Credit portfolio managers remain pessimistic on credit defaults over the next 12 months, but they are mixed about credit spreads over the next three months, said a quarterly survey from the International Association of Credit Portfolio Managers.
The aggregate IACPM credit default, while still negative, improved slightly to -22.4 as of Dec. 31 compared to -28 three months earlier.
A negative number indicates credit conditions are expected to worsen, while positive numbers mean conditions are expected to improve.
Managers were “remarkably more pessimistic” on Europe, said Som-lok Leung, executive director of the IACPM. “There's a lot of negative news coming out of Europe,” Mr. Leung said in a telephone interview. “Economic data coming out of Europe shows it is in much worse condition compared to the U.S.”
Among the various sectors, Europe dropped the most in the fourth quarter to -31.4 as of Dec. 31 from -22 as of Sept. 30, followed by North American to -24.4 from -20. Australia and Asia, while still negative, improved to -33.3 from -43.5, and -29.2 from -40, respectively.
Managers are less certain on the movement of credit spreads, Mr. Leung said.
The overall IACPM credit spread outlook index fell to -4.3 at the end of the fourth quarter, down from 4.4 at the end of the previous quarter. “There is a lot of volatility and uncertainty in the market, which is reflected in our spread outlook,” Mr. Leung said.
The outlook for European credit spreads fell to -9.7 as of Dec. 31 from 13.2 as of Sept. 30, while the index for high-yield debt dropped to -3.3 from 8.3.
About 40 of IACPM's 102 members — financial institutions in the U.S., Europe, Asia, Africa and Australia — responded to the fourth-quarter survey.