| NEW YORK, April 21
NEW YORK, April 21 Rising corporate debt
defaults and widening credit spreads are expected globally, even
as sentiment is less dire than in recent quarters, according to
an International Association of Credit Portfolio Managers
Interest rates are climbing, “but even so, rates remain
historically low and the real question isn’t whether defaults
will rise but rather at what rate,” Som-lok Leung, IACPM’s
executive director, said in a statement. “Our members don’t
think defaults will soar.”
The group’s 12-month Credit Default Outlook Index improved
to -31.3 in the first quarter from -37.9 in the fourth quarter,
a big shift from -56.2 in the first three months of last year.
Still, negative numbers indicate expected credit
deterioration with higher defaults and wider spreads.
A steady pace of US economic growth led the Federal Reserve
to raise interest rates in March, soon after its December 2016
hike. The central bank has signaled two more increases for this
Meanwhile, a sense of financial markets complacency is
concerning, IACPM said in the statement.
Credit spreads are tight, with little or no risk premium,
while the Brexit process, French elections, uneven growth in
Asia and uncertainty over central bank activity pose challenges,
according to the group.
“There’s a whole list of potential problems, but so far
we’re managing to contain them,” Leung said.
Credit spreads are seen widening across all regions in the
short term, although the outlook is less negative than it has
been in recent quarters.
The IACPM 3-month Credit Spread Outlook Index improved to a
-21.8 reading in the first quarter from -27.3 in the fourth
quarter and -38 in the first quarter of last year.
“Despite all the challenges, there doesn’t seem to be any
imminent catalyst for wider spreads or rising risk premia,” said
(Reporting by Lynn Adler; Editing By Jon Methven)