Loan managers turn bearish on spreads

The latest quarterly survey by the International Association of Credit Portfolio Managers shows that bank loan portfolio managers have become more bearish on both default rates and spreads. Reversing the positive sentiment shown in the previous survey, respondents have, on average, negative expectations of credit spreads for both the US and Europe. Managers were evenly split on whether or not corporate defaults would rise in future (having previously expressed an expectation that default rates would fall). However, managers were in strong agreement that commercial real estate defaults would rise.

The survey does not provide any projection of default rates or future spreads, but uses respondents’ answers to create an index summarising the outlook of credit portfolio managers.