US Bank Debt Investors Demand More Yield on Private Credit Ties

Investors are demanding a higher premium on bonds issued by US banks than their European counterparts, reflecting anxiety about American financial institutions’ exposure to private credit, even as the space has shown signs of stabilizing in recent days.

Alongside Wall Street’s biggest lenders, American insurance companies and business development companies — or BDCs, a key investment vehicle for direct lenders — have also seen their spreads, or the additional interest above Treasuries demanded by investors, widen, according to research from Citigroupanalysts Daniel Sorid and Mathew Jacob.

“US banks and insurers are notably under-performing their international peers due to ...