Credit portfolio managers are growing more optimistic about the credit outlook in Europe, while growing more pessimistic about the outlook in North America, said a quarterly survey from the International Association of Credit Portfolio Managers.
The Credit Default Outlook index for European corporate debt for the next 12 months, while still negative at -10 in the first-quarter survey, was still a significant improvement over -31.4 the previous quarter.
A negative number indicates credit conditions are expected to worsen, while positive numbers mean conditions are expected to improve.
The index for North American corporate debt, however, fell to -38.6 from -24.4 the previous quarter.
“It's important to remember that the North American economy has performed relatively well and defaults are at an extremely low level,” said Som-lok Leung, executive director of the IACPM, in a news release, “so it's not surprising that people think defaults will increase in the future. At the same time, though, survey respondents are specifically looking at the knock-on effect of lower oil prices and the expectation that the Fed will raise interest rates at some point this year.”
The outlook for the next three months for Europe and North America in the first quarter was 23.1 and -11.4, respectively. The three-month outlook for European debt had been -9.7 the previous quarter, while the North American index had been 2.5.
Mr. Leung added that the outlook for credit spreads was likely reflective of global central bank action, with the European forecast for spreads improving in the face of quantitative easing.
IACPM is an association of credit portfolio managers at 102 financial institutions in the U.S., Europe, Asia, Africa, and Australia.
