BoE Credit Conditions: Positive For Bank Credit Spreads

BoE credit conditions survey: appears positive from a banks’ perspective with better demand and the key default stats look better than expected. This should be taken positively for financials spreads but leaves an obvious question for the rate of BoE rate cuts from here.

• Supply: this looks a little better than prior expectations, especially in household secured and the forward outlook is the best in the last three years. Household unsecured is marginally better than before and corporate looked very similar.
• Demand: household secured was much better than prior periods and the expectations, though the outlook remains relatively muted from here. Corporate demand was broadly in line.
• Pricing: a mixed bag but nothing market-moving in here with broadly stable trends, including some better pricing in the cards market.
• Defaults: better trends than expected. Household secured was looking for a 40% rate-of-balance-increase and it came in at low-20%s. In unsecured, it was over 30% and come in at under-20%. Expectations remain for this to worsen more quickly in the coming quarter (same pessimism as last time).