Credit managers continue to believe credit defaults will increase during the next 12 months, said the latest quarterly survey from the International Association of Credit Portfolio Managers.
The Credit Default Outlook index for the next 12 months is -48.1, up from -52.8. A negative number indicates credit conditions are expected to worsen, while positive numbers mean conditions are expected to improve.
By region, 67% of credit managers believe Asian credit defaults will increase, while 66% of credit managers believe North American credit defaults will increase. North America's credit default outlook index dropped to -55.3 from -48.7 the previous quarter.
While 58% of managers believe European credit defaults will increase over the next 12 months, in the previous quarter 68% of managers believed that credit defaults would increase. While the overall outlook is negative, Europe's credit default index rose to -45.2 from -64.9 as a result.
The lesser pessimism in the European outlook is likely due to more time passing since Brexit, said Som-lok Leung, IACPM executive director, in a telephone interview.
“Not too long after Brexit, there was certainly a fear that things could be very bad,” Mr. Leung said.
Slower Chinese growth, uncertainty over the next steps to be taken by the Federal Reserve, and the upcoming U.S. elections are all contributing to managers' overall pessimism.
“It's a lot of uncertainty across a number of fronts and that's really what causes uncertainty, which causes worry. It makes things a bit less predictable,” Mr. Leung said. “There are things that could go wrong in credit, and that's what I think the results reflect. It's not that they definitely will go wrong but the possibility is looming, and they're building that into their expectations.”
The survey is conducted among IACPM members, which consist of credit portfolio managers at more than 90 financial institutions in the U.S., Europe, Asia, Africa and Australia.