The poll of credit investors had found in October that 99 percent were looking for a “TARP moment,” in Europe — a reference to the Troubled Asset Relief Program instituted in the U.S. in 2008 to recapitalize banks after the financial crisis.
The program wasn’t implemented, though, until after a major market tumble that forced Washington’s hand.
European policymakers have come under fire for being slow to implement measures that would address the sovereign debt of countries such as Greece and Italy and how losses associated with that debt would affect banks holding those bonds.
U.S. credit investors, though, now see a “major European shift on their crisis from denial to being on the case and doing something about it,” Hans Mikkelsen, BofAML credit strategist, said in a research note regarding the November survey.
“As a result, investors are now fairly equally split between a camp that thinks Europe still needs a ‘TARP moment’ — i.e., a big selloff in the markets that prompts more decisive intervention — and the other camp that believes Europe will be able to get through or muddle through its crisis,” the note said.
Political leaders have pledged help through the European Financial Stability Fund, and Greece has agreed to a near-default scenario in which it discounts the value of its bonds in exchange for austerity measures aimed at getting the nation’s fiscal house in order.
Though the European crisis looks far from being settled and markets remain volatile, the credit crowd at least appears a bit more sanguine.
Among those who think that Europe will get through, “the belief is that either the current plans are sufficient to arrest the crisis, or will be modified appropriately,” the analysis said.
Of course, the downside of such sentiment surveys is that they often can be contrarian indicators — in other words, when investor sentiment starts to shift strongly in one direction, it can mean that complacency is setting in and opening the markets for a shock.
One of the most prominent voices in the credit markets worries that leadership is still lacking when it comes to wrestling with euro zone debt issues.
“We are all living through a very consequential time,” Mohamed El-Erian, co-CEO at bond fund manager Pimco, said in a CNBC interview.