Northleaf says higher base rates lift private credit yields in Q3
XLF•Northleaf Capital Partners said higher base rates lifted floating-rate loan yields, while subdued issuance reflected weak M&A and LBO activity. Redemption requests at 11 of the 14 largest U.S. non-traded BDCs averaged about 13%, above the typical 5% quarterly limit.
1. Private credit conditions
Northleaf Capital Partners’ Q3-2026 analysis said private credit issuance was subdued as weak M&A and LBO activity constrained lending. The Fed raised rates 25 basis points in September to 3.75%-4%, lifting contractual cash yields on floating-rate loans; private credit retained an approximately 150-basis-point premium over public credit as U.S. spreads stabilized after widening in the first half.
2. Redemptions and borrowers
Redemption requests at 11 of the 14 largest U.S. non-traded BDCs averaged approximately 13%, exceeding the typical 5% quarterly limit. Borrower performance remained broadly resilient, with stress concentrated in select borrowers, consumer-facing industries and 2021 vintages.
