Hello everyone, and welcome to an update on global credit conditions as credit surveys have been published lately by some of the biggest economies worldwide, with the Fed releasing SLOOS and Japan releasing their equivalent. 

Credit has not really been mentioned much, and has gone a bit under the radar as credit spreads have remained silent, signaling that there was nothing to worry about, but the more we dig into it, the more it looks like the spreads will have to move sooner rather than later. That’s at least what the surveys are telling us..

Main conclusions upfront: 

• Spreads are generally very

Starting off with the supply side, it’s clear that conditions are still tightening, although not as fast as last quarter, which is at least positive news for the bulls, but worth noting is that only 1 respondent out of the 59 asked in total reported that conditions “eased somewhat” compared to last period. Nothing to celebrate (yet). Europe more or less follows the patterns of the US, but at lower and less volatile levels with only 10% of respondents reporting tighter credit standards – looser credit conditions soon? Would definitely receive some rhetoric from Lagarde if that happens. 

The interesting case in this study is Japan, whose credit conditions remain unchanged compared to last quarter (note that Japan is on the left hand scale), which makes sense given the ultra-loose policy conducted for years. The probabilities are clearly skewed to the upside for Japanese credit conditions (and credit spreads), which could turn out to be the driver of global risk appetite amidst the Japanese pulling money out of USTs.

Chart 1: Tighter conditions all around, but not as bad in Europe and Japan