Quick BDC Market Update: 18% Average Yield But Continued Volatility

BDC prices got hammered this month for the reasons discussed below.
At one point the average BDC was trading at almost a 60% discount to book value.
BDCs have started to rally but still have an average dividend yield of more than 18%. Please expect continued volatility that I will discuss in upcoming articles.
BDCs will start reporting results next month and as they report we will a good idea of what to expect so investors need to pay close attention.
BDC Stock Price Declines
Business Development Companies ("BDCs") got hammered this month along with other higher-yield credit-related investments for many of the reasons discussed below. It is important for investors to understand that BDCs are mostly retail-owned and many of the investors manage their own accounts potentially reacting out of fear.
BDCs are considered "small-cap" and if an investor is looking to reduce exposure they might sell (regardless of quality). BDCs are part of the "financial sector" and if an investor is looking to reduce exposure they might sell (regardless of quality). BDCs are considered "higher yield" and "higher risk" and if an investor is looking to reduce exposure they might sell (regardless of quality). Lower prices could have triggered margin calls on certain investors who need to sell to cover. Also, there is a good chance that some of the recent declines were related to programmed trading and tax-loss harvesting.
Also, UBS redeemed its ETN's BDCL and LBDC which was technically triggered by having their values fall below $5.00.

From UBS:
"UBS Investment Bank today announced that all outstanding notes of the 2×Leveraged Long ETRACS Linked to the Wells Fargo® Business Development Company Index due May 24, 2041 (Ticker: BDCL) (the "Series A Securities") and the 2×Leveraged Long ETRACS Wells Fargo® Business Development Company Index ETN Series B due May 24, 2041 (Ticker: LBDC) (the "Series B Securities", and together with the Series A Securities, "the... Read more