GLOBAL - Delegates at the the fourteenth annual Uhlenbruch Portfolio Management conference in Frankfurt today signalled growing fear of a US debt default within the next five years, as well as expectations for a haircut on Greek government bonds and continuing depressed German Bund yields next year.

Almost 190 finance and institutional investor professionals were asked to vote anonymously on these and other questions during a conference debate.

Whereas this time last year only 1.9% anticipated a US default within five years, this year 22% of 172 voters put the country on their at-risk list. Some 63% predicted a default from among the euro-zone peripheral sovereign borrowers, while only one-third expect the western world to escape the next five years with no defaults at all.

Of 187 voters, 65.2% expect investors to have to take a 'haircut' on Greek bonds - but there was some optimism that contagion could be contained: only 41.8% of 184 voters expect another country to inflict a haircut, too, against 50% who said there would be no other failures to repay, or amend bond terms.

Hans-Gunter Redeker, global head of foreign exchange strategy at Morgan Stanley was less than optimistic about the immediate future for the euro-zone and said he believed that the political process toward greater fiscal union - and ultimately a transfer union - would pick up pace.

"That will ultimately hold the euro-zone together even though the crisis will worsen," he said.

Hans-Werner Sinn, the celebrated economist at the University of Munich, gave the keynote speech after the debate, and observed that current Greek bond yields indicated that the market - that is, banks and pension funds - had already accepted that Greek bonds would be subject to a haircut.

"There has to be a haircut," he said. "Investors must take some responsibility because without differentiation in bond yields and interest rates there can be no market control over capital flows within the euro-zone. The market has accepted this, so no major turbulence should result from a haircut."

However, the general gloominess over Europe's immediate prospects was expressed in the delegates' voting on benchmark 10-year Bunds. A full 77.2% of 189 voters expect yields to stay below 4% for the next year, with almost 15% expecting them to struggle to get above 3%.

The more optimistic participant in the debate, Holger Schmieding, chief economist at Berenberg Bank, sided with the 21.7% who anticipate yields in the 4.1-5.0% range.

"The crisis is going to be difficult," he conceded. "But as well as risks there is a significant opportunity that the peripheral euro-zone economies will implement reforms like Germany's own 'Agenda 2010' post-reunification labour and social reforms which have led to our current economic strength."