The Credit Market Lens: Differing Signals in BDCs, and Orderly Defaults in High Yield

PIMCO

Lotfi Karoui

Research

7 Pages

PIMCO analyzes how equity and credit investors are reassessing BDC valuations differently, and why high yield defaults continue to play out primarily through distressed exchanges.

Key Takeaways

BDC Marks Diverge: Similar loans across BDC portfolios show mark dispersion above 5 percentage points, raising NAV credibility concerns.
Defaults Stay Contained: U.S. dollar high yield default rates remain near their long run median of 4%.
Exchanges Dominate Defaults: Distressed exchanges accounted for 11 of 20 issuer level defaults in Q1 2026.
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