- On one hand, BDC index prices moved up again. On the other hand, other data we use to measure investor enthusiasm for the BDC sector was unmoved.
- We seek to reconcile this contradictory picture, while looking forward.
This may have been a holiday shortened week, but there was notable news where BDC sector pricing was concerned.
High-yield extended its June rebound with increasing vigor over the past week amid retail cash inflows and declining interest rates, and the new-issue machine kept churning out maturity-extension focused refinancings, peppered by a few M&A situations. The loan secondary, by contrast, was little changed, with new issues at an ebb pre-holiday and the specter of falling rates dampening enthusiasm among end investors.
Bifurcated market conditions continued to reign in new-issue loans despite modest deal flow and a panoply of deal revisions that reflect the challenging nature of the current calendar; in the month to date B3 issuers comprise 44% of rated volume, the highest percentage since December. Bonds charged forward with a bunch of refi-related prints tight to talk, but the two buyout financings met some inevitable pushback on issuer-friendly terms.
Unusually, the BDC sector outstripped the major indices in the week ended June 14, 2019. As the chart below illustrates, BDCS – the UBS Exchange Traded Note which includes most of the 45 public public funds we track – was up 1.4%, to $19.92. BDCS is in blue.
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