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Laxman Pai, Opalesque Asia: Credit portfolio managers expect rising corporate defaults globally over the next 12 months, lagging factors such as rate increases, according to the fourth-quarter survey from the International Association of Credit Portfolio Managers (IACPM).
Of the IACPM member institutions that took part in the survey, published in January 2023, 91% expected corporate defaults to increase in Europe in 2023, 88% said defaults would increase in North America, and 68% thought they would rise in Asia. The survey, calculated as a diffusion index, didn't predict the scale of the defaults.
According to the report, while a deluge of defaults has not taken place so far, that could change in either the near term, later in 2023, or perhaps even later than that. Fresh signs could come as soon as the next few weeks as corporations, including banks, report quarterly earnings results. That said, distress signals have been limited thus far too particularly vulnerable sectors, such as leveraged lending and energy credits impacted by the war in Ukraine.
Financial markets appear to be pricing in an easier interest rate environment in the second half of the year after exceptional tightening last year and in the face of central banks' continuing public resolve to raise rates until inflation is under control. Key questions going forward are how high will rates rise and how long will they stay at higher levels.
Survey respondents are forecasting wider credit sp...................... To view our full article Click here
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