BDC Market Recap: Week Ended March 24, 2017
We are at Week 12, and the BDC Sector pulled back. A little.
BDCS ended at $23.36, down from $23.47 the week before.
MID WEEK WAS A DIFFERENT STORY
However, that only tells part of the story.
In mid-week, our BDCS measuring stick was down to a low of $23.05, as the markets jittered.
By recent standards BDC price volatility was high over the past 5 days, reaching a range of 2.5%.
Only 20 BDCs were priced above their 50 Day Moving Average, down from 28 last week.
30 are beating their 200 Day Moving Average Price, down from 33.
Likewise, there was slippage in how many BDCs were within 10% of their 52 Week High: 31 versus 35.
THE ABOVE NOTWITHSTANDING…
However, we are not making too much of these shifts. The mood remains merry in BDC-land.
No less than 4 BDCs were within 1% of their 52 Week Highs.
Golub Capital (GBDC) reached an all time high before raising new equity, as we covered in an earlier article.
Alcentra Capital (ABDC) reached a level not previously reached since June 2015.
TPG Specialty (TSLX) is at a level not reached since the summer of 2014.
THE VIEW FROM THE BASEMENT
At the other end of the telescope, we had 4 BDCs within 10% of their 52 Week Low.
BlackRock Investment (BKCC) had a down week, but remains 8% off its 52 Week nadir.
That other poster BDC whipping boy-Fifth Street Finance or FSC-climbed a little way out of the cellar.
Both the market for BDC common stocks and for non investment grade credit remain very, very buoyant.
We read this week that spreads on B rated borrowers were their narrowest since before the Great Recession.
That suggests lenders of all stripes are in a non differentiating mood, and this seems to be spilling over to equity investors in lenders.
The BDC Reporter expects that spread compression, and a dearth of new buy-outs, will do much more harm to BDCs earnings than any benefit from an increase in LIBOR.
Moreover, there is credit trouble brewing in the retail, health care, restaurant and the energy sector, which might dampen leveraged debt returns across all segments.
All of that,though, is trumped (you see how we did that ?) by the continuing “animal spirits” in the market.
PRETTY, PRETTY GOOD WEEK
Arguably, Baby Bonds had a marginally better week than BDC common stocks.
Using our rough measuring stick of the median price of 35 public Baby Bond issues, the group was essentially unchanged (up a penny for those keeping score).
BY THE NUMBERS
15 are trading above their 50 Day Moving Average, up from 14 the week before.
21 are above the 200 Day Moving Average, also +1 from the week before.
Excepting Medallion Financial’s troubled Baby Bond with the ticker MFINL all the remaining 34 issues traded above par on the week.
Notably, 6 issues are trading above $26.0 a share.
THE REASON (S) WHY ?
Doubts about the oft-predicted “huuuge” increase in medium and long term rates continue to keep existing Baby Bond prices in a narrow range.
Plus, there’s that contagious enthusiasm coming from the equity markets to contend with.
IN OTHER NEWS
Nothing much to report.
The Baby Bond scene continues to be very quiet, both for new issues and redemptions.
BDC Baby Bond investors are clicking coupons and enjoying another week of low volatility.
That’s more than a year of plain sailing in the BDC Baby Bond prices.
As they say: “it’s too quiet out there”.