Middle market debt held by BDCs vs High yield vs Treasury yields

The blue line represents the current dividend yield of the VanEck BDC Income ETF (BIZD), which stood at 12.3% as of 30 July compared to 11.0% a year earlier. BIZD’s price declined 23% YoY to USD 12.42, while its trailing-12-month distribution fell 14% to USD 1.52 per share. The July quarterly dividend of USD 0.24 per share was down 46% YoY and 50% QoQ. While distribution timing may have contributed to the decline, continued weakness in dividends could reduce BIZD’s forward yield and income cushion against deteriorating BDC portfolio credit quality. Fitch’s US Private Credit Default Rate reached a record 6.0% for the trailing 12 months ended 2Q26, up from 5.7% in 1Q26, with 84 unique defaulters compared with 78 in the prior quarter. The privately monitored ratings default rate eased to 9.4% from 10.0%, although maturity extensions under stress accounted for more than half of the 32 default events recorded during 2Q26. 

US headline inflation eased to 3.5% YoY from 4.2% in May, mainly driven by a 5.7% decline in energy prices, as Iran and Oman were nearing an agreement on limited safe passage through the Strait of Hormuz. However, vessel transits fell 66% WoW ended 20 July, while tanker and gas-carrier crossings declined to 30, from 90. Extreme volatility and continued disruption could raise fuel, freight and insurance costs, pressuring working capital and debt-servicing capacity for leveraged middle-market borrowers. Given the decline in headline inflation, the Fed held rates at 3.50%-3.75% on 29 July in a 9-3 decision, with three members preferring a 25bps increase, indicating that inflation concerns remain elevated.

The orange line represents the BofA US High Yield Index effective yield, which stood at 7.2% as of 30 July, compared with BIZD’s 12.3% dividend yield. The spread was 511bps, broadly unchanged from 516bps on 24 July and above 413bps a year earlier, but below the one-year average of 565bps. BIZD therefore continues to offer a wide nominal income premium, although its future dividends and equity distributions can be reduced, unlike contractual high-yield coupons.

The spread between BIZD’s dividend yield and the 2-year US Treasury was 804bps as of 30 July, broadly unchanged from 802bps on 24 July, but below the one-year average of 867bps. The wider YoY spread and weaker BIZD price indicate that investor caution toward BDC and private-credit exposure remains elevated.

*As of 30 June 2026, BIZD’s weighted average market cap stands at USD 5.3bn, with PE ratio of 11.63 and PB of 0.86, with the entire portfolio holdings in publicly traded BDCs. Click here for top holdings.

(Past performance is no guarantee of future results.)