Banks’ reluctance to lend seen as biggest risk to credit markets: survey

Fixed income investors harbour a gloomy outlook for the year ahead, according to a survey by Fitch Ratings.

The rating agency noted that money managers are expecting that either a deep, or very deep, recession will grip the U.S., Europe and emerging markets over the coming year. It also found that they believe the economic downturn is likely to last one to two years across all regions.

The survey, conducted in January, found that 57% of respondents are not expecting normal conditions to return to the housing market before 2010. However, most investors believe that credit market stability will return sometime in 2009 (77% expressed this view).

Banks’ reluctance to lend received the most votes as a high risk to the credit markets over the next 12 months, Fitch noted, and nearly 40% of respondents believe that banks’ willingness to lend will not stabilize this year.

IE