"Financial professionals believe that government action over the past three weeks have stabilized the credit markets. Over 1,000 attendees at the Annual Conference of the Association for Financial Professionals (AFP) indicated that various government action, including 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 availability."
"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."
AFP says that 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 credit. 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. On Monday, Oct. 21, AFP surveyed attendees at its Annual Conference on the current state of the short-term credit market.
