With all the BDC I follow down significantly today, I would suggest that the reason is something other than year end rotations or tax planning. The posts by both lunco and Xenephon are correct, the sell-off today is because of the spike in interest rates, just the same as every sell-off BDCs have had since last May. Anyone who invests in BDC really needs to know the effect that changing interest rates has on earnings and thus on share price. How much the rates rise and how fast rates rise are two separate factors to understand. They are not the same. Also, a person needs to know how these two factors will affect the BDC in which they are invested. For PSEC, a steepening yield curve, (high long-term rate and low short-term rates), is good. However, the rate at which longer-term rates rise is also important. If they rise too fast, there is an increased risk of default by borrowers. Therefore, what is best is gradually increasing longer term rates with short term rates being kept low. The spike in longer-term rates today is, IMO, a short-term occurrence and so, IMO, the current sell-off will be short lived resulting in a buying opportunity for those who want to increase their positions in PSEC.
It is a direct result of a significant spike in interest rates, especially in the 10 year rates which resulted in a significant sell-of of BDCs. Not to panic though, this is just part of adjusting back to "normal".
PSEC debt is fixed their loans adjusted so interest rate hikes help PSEC but most people do not study their investments very well.This stock was down to $11.08 in the beginning of last month,.almost right back where we started from.Hey I might right a song about that.
You are correct about the effect of the spike today in interest rates being the result of the sell-off in BDCs. I am frankly quite surprised that the effect of rapid moves in interest rates is so little understood by investors in BDCs and other interest rate sensitive companies. That might, however, explain why changes in interest rates are apparently ignored be so many BDC investors.
Interest rate increases helps PSEC's bottom line, they make MORE on their loan agreements. PSEC rate terms float they are not locked. Therefore this is a buying opportunity. Interest rates have not changed since the Spring.
Sentiment: Strong Buy