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Weekly Market Summary
May 18 to May 22, 2026
Extra Credit*
- The largest business development companies (“BDC”) experienced a meaningful contraction in portfolio size during the first quarter of 2026, reflecting both weaker new investment activity and valuation markdowns on existing holdings. The top 12 publicly traded BDCs tracked by LCD reported gross fundings of approximately $5.7 billion in Q1, down from $9.1 billion in Q4 2025 and $8.4 billion in the prior-year. The total marks the lowest level of gross fundings since LCD began tracking the data two years ago.
- A meaningful portion of first quarter deployment among the largest BDCs came from transactions originated in the fourth quarter that closed in Q1, with those deals committed at spreads tighter than current market levels. As a result, the recent decline in portfolio yields is expected to reverse in coming quarters as new investments are made at wider spreads. Several BDCs also noted that spreads on new investments widened during the first quarter. Morgan Stanley Direct Lending Fund, for example, reported approximately 25 basis points of spread widening in Q1, followed by another 25 basis points of widening early in the second quarter.
- The repricing market has reopened, though activity remains concentrated among higher-quality borrowers. BB1 rated issuers are leading the recovery, with the share of loans trading at par or above returning to January highs, while single-B and technology-related credits continue to lag. Improving secondary market prices are helping revive opportunistic refinancing and repricing activity, but investor demand remains selective. Higher-rated borrowers and companies viewed as less exposed to AI disruption are benefiting most as investors differentiate more sharply across credits. The leveraged loan index weighted-average bid climbed to 95.40 by May 8, recovering to mid-February levels and rebounding 123 basis points from the early-March low of 94.17.
Pitchbook as of 5/20/26. 1Ratings are from Fitch. Fitch Ratings evaluates the creditworthiness of entities and assigns ratings from AAA (highest) to D (default), assisting investors in assessing default risks.
Previous reports
*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Morningstar LSTA US leveraged Loan Index. The red and green arrows depicted under Yields, Option Adjusted Spreads, and Prices indicate a higher or lower value from the previous week.
Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indexes are unmanaged and it is not possible to invest directly in an index.
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