U.S. senior fixed-income investors are taking a more conservative view of cross asset credit conditions on the back of recent macroeconomic concerns, according to a Fitch Ratings fixed-income forum survey of fixed income professionals, conducted in June.
Investors expressed a more downbeat view of U.S. growth. In January, 43% of investors saw growth above 3% over the coming year. Now, however, they are roughly split (51%/47%) between those that believe U.S. growth will be moderate — in a range of 2% to 3% — and those expecting weaker growth of below 2%.
Improving labor market conditions received more attention than in prior surveys as a factor critical to the U.S. recovery, more so than financial stability in the Euro zone or home price stabilization. The majority of the investors participating in the survey (48%) said they still saw an 8%-9% U.S. unemployment rate by year-end 2012.
Professional money managers surveyed consider the sovereign debt crisis the top risk factor. Inflation fell further off the radar as a near-term worry. The prospect of weaker economic growth manifested itself in the outlook for specific industries and spreads.
The survey results also showed that areas that previously had a majority of respondents predicting spread tightening, now carry a more balanced view. These included speculative grade corporates and some structured areas, particularly CMBS.