BDC Weekly Review: BDC Valuations Have Blown Past Fed Rate Expectations

Summary

• We take a look at the action in business development companies through the first week of October and highlight some of the key themes we are watching.
• Recent sector weakness is not fully explained by fundamentals; concerns over isolated bankruptcies like First Brands are weighing on broader BDC prices.
• Current BDC yields have increased more than what is justified by expected Fed rate cuts, suggesting the market is overly pessimistic about future losses.
• We are actively adding to high-quality BDCs such as MSDL, NCDL, BXSL, and OTF, viewing the current environment as favorable for selective buying.