A survey conducted by the International Association of Credit Portfolio Managers (IACPM) shows that credit investors believe spreads will widen along with the number of defaults. Their outlooks are even more pessimistic than they were in May, when the IACPM conducted a similar survey.

“Many of our members believe the market has overshot the underlying credit risks and is now due to pull back, said Som-lok Leung, executive director of the IACPM.

Participants in the survey, dubbed the Credit Outlook Index, are asked a simple question: Do you think spreads and/or defaults will go up, go down or stay the same? If more respondents say spreads will widen or defaults will increase, then the index heads in a negative direction starting from zero. If more respond positively, the numbers head the opposite direction. The index ranges from -100 to 100.

The overall credit spread outlook index for the second quarter was -43.5, compared with -19 for the first quarter of 2009. The major credit default outlook index for the second quarter was -72.3, compared with -95.3 for the first quarter.

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