In markets beset by eroding employment numbers, volatile tariff policy and a deadlocked legislature overseeing a government shutdown, almost half of credit portfolio managers say they believe credit default rates and spreads will hold steady for the next three months, according to recent industry research.
When polled in September, 49% of North American managers of investment-grade, five-year debt said they expected credit spreads to remain unchanged for the next three months, according to findings from the International Association of Credit Portfolio Managers.
Among managers of high yield, five-year debt, 57% said they expect spreads to widen over the next three months.
The actual index level, based on a diffusion index, was -40 for North American managers of investment grade, high-yield assets.
The 12-month outlook for corporate defaults was slightly worse, as 48% of credit managers felt those would increase among average corporate credits, the largest percentage reported in that segment of the study. Also, 62% of those polled said they expected North American corporate credits to experience rising defaults, the IACPM said.
Forty-six percent of respondents expect defaults to rise in Europe and 40% believe defaults will increase in Asia over the next 12 months.
"Our member note money is pouring into all sorts of investment vehicles, from corporate bonds to private credit and alternative structures," according to a statement from Som-lok Leung, IACPM's executive director. "Inflation seems to be mostly under control and investors have to invest."
Not every area of credit triggered significant concern. Commercial real estate, in fact, seems to have recovered some confidence from portfolio managers throughout the industry even in the weeks leading up to the IACPM's study release.
"The office CRE crisis did not trigger systemic risk," according to Tracy Chen, a portfolio manager at Brandywine Global recently told Asset Securitization Report. "Instead, it is slowly recovering in certain places. A good example is within the New York office market."
