AFP: Credit Markets Stabilizing

by Erin McCune on October 21, 2008

in AFP, Conferences & Meetings, Economic Outlook, Finance, Research Round Up, Treasury & Cash Management

A survey of corporate finance professionals attending the annual Association for Financial Professionals (AFP) conference in LA this week reveals that they perceive the credit market is stabilizing due to recent government actions. The U.S.
Treasury plan to purchase an equity stake in key financial institutions
and guarantee money market funds, along with the Federal Reserve’s plan
to purchase Commercial Paper, has improved the outlook for credit

"While the economy appears to be shaken, credit looks to be
stabilizing," said Jim Kaitz, President and CEO of AFP. "More than
three weeks ago, we said that the most pressing issue for business is
access to credit. Actions by policymakers have in recent days brought
some measure of confidence back to the markets."

Survey respondents indicate overwhelmingly (97%) they think
the U.S. economy is in recession. One-third (34%) believe that the
recent turmoil in the credit markets precipitated the recession, while
nearly two-thirds (63%) believe that the U.S. was already in recession
prior to September’s events.

Despite belief that access to credit has stabilized in the
last two weeks (75%), many companies are still experiencing
difficulties. More than one quarter (25%) report that their access to
new or additional short-term credit is very limited. A nearly similar
percentage of survey respondents (22%) report that the tight credit
markets over the past month have stalled growth opportunities.

Overall, financial professionals are more positive about the outlook for short-term credit.

  • 69% indicate that the Treasury’s purchase of preferred shares in
    U.S. financial institutions will improve corporate access to short-term
  • 81% cite the Federal Reserve’s plan to purchase Commercial Paper and guarantee money market funds as improving access.

The recent government actions have led some organizations to be more
comfortable in investing outside of ultra-safe Treasury securities.
Thirty-one percent of survey respondents indicate that they are more
comfortable with re-allocating at least some of their short-term
investment portfolio into other high-quality investment vehicles that
offer higher yields.

Source: AFP Online

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