Structured Credit: The Outlook for 2024

This paper is derived from a Risk.net webinar sponsored by Numerix, where a panel of industry experts discussed the risks, opportunities and outlook for the structured credit markets in 2024.

High inflation and rising interest rates were the top challenges in the mortgage-backed securities (MBS) and leveraged loan markets in 2023, and will remain major challenges through 2024. There is a lack of consensus in the market over the future direction of rates and the speed with which they might come down. This uncertainty is increasing the need for robust risk management.

Get informed perspectives on:

• Inflation and the economy: Research conducted by Coalition Greenwich found that buy-side firms consider inflation the biggest risk to their businesses, which is resulting in an increased focus on inflation in their risk modelling.
• Interest rates: The steep run-up in interest rates worldwide over the past two years has increased the priority that firms are placing on stress-testing, noted Kelli Sayres, senior managing director and head of product at Numerix.
• US regional banking crisis: Panelists agreed that the collapse of several US regional banks in March 2023 was a liquidity – rather than a credit – crisis, but there are implications for stress testing and asset-liability management.
• Risk and uncertainty: Factors such as geopolitical risk, market volatility and economic uncertainty are making forecasting and planning extremely difficult, leading to a wider range of expectations than usual for 2024 and beyond.