BDCs as another weak link in private credit + Sonia vs Euribor - VP Portfolio Watch | Research

Business Development Companies (BDCs) are levered listed vehicles holding illiquid loans to highly-levered companies.
Our active US recession signal suggests the US recession has already started and shorting leveraged loans or BDCs can provide an asymmetric payoff in 2H23 despite the negative carry.
The June 2024 Sonia vs Euribor futures spread is back to levels last seen in the Liz Truss mini-budget debacle from 2022. Inflation LEIs point to a contradiction between the relative policy mix and market pricing.