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The Return of Optimism in Credit Markets

Recovery sign
Recovery sign

What a difference three years makes.

The mood was decidedly upbeat at the economic symposium in Charlotte this week—a stark contrast to what happened in 2007, when participants realized that the credit market was about to take a big dive.

This week, the consensus is that credit markets have rebounded: Analysts see a comeback in both the credit quality and a decline in defaults on both the consumer and corporate sides.

On the consumer sides, the total number of delinquent credit accounts peaked in the middle of last year; a chart presented Thursday by Mark Zandi, Moody's chief economist, showed the total number of delinquent accounts and the volume of delinquent loans are declining.

On the downside, commercial real estate continues to be a financial basket case. Blackrock’s Sally Gordon expects the turnaround to take years. However, even in that arena, there’s latitude in thinking: Some analysts are saying that the situation isn’t so grim, because maturities and rollovers are spread out longer.

A final point: Fitch's Mariarosa Verde said if you annualize the corporate default rate in the 1st quarter, it is at 3%, one of the lowest on record.