Money-Market Yields vs. Private Credit: Are You Actually Being Paid for the Risk?

According to Federal Reserve Economic Data (FRED), the 3-month Treasury bill yielded 3.84% as of July 16, 2026, a number so unglamorous that most financial media won't even write a headline about it. Meanwhile, private credit funds and business development companies (BDCs, which are publicly traded vehicles that lend to mid-size companies and pass the interest income to shareholders) are advertising headline yields north of 11%. That gap looks like free money. It isn't. I want to walk you through what you're actually being paid for right now, because the math retail investors are doing in mid-2026 is missing a step that matters.

What the Headline Numbers Actually Say

Start with the boring side of the ledger. Money-market funds and short T-bills were paying between 3.5% and 3.66% as of July 2026, tracking the 3-month T-bill at 3.80% to 3.84%, per FRED and TradingEconomics data. That's a floor. It's liquid same-day or next-day, it's backed by the full faith and credit of the U.S. government or by high-grade commercial paper, and there's no NAV to mark down because the underlying instruments mature at par.

Now the exciting side. The VanEck research team pegs the S&P BDC Index yield at roughly 11.7% as of March 2026, with large-cap names like Ares Capital, FS KKR Capital, and Goldman Sachs BDC averaging 12.6% in the back half of 2025. On paper, that's an 8-to-9 percentage point spread over a T-bill. If you stopped reading there, you'd conclude private credit is one of the easiest trades of the decade.

Here's the table almost nobody puts side by side, because the two sides are calculated differently and that difference is doing a lot of work.

Instrument	Headline Yield (mid-2026)	What It's Actually Paying You For	Liquidity
3-month T-bill	3.80%–3.84%	Time value of money, near-zero credit risk	Same-day/next-day, no NAV risk
Top money-market funds	3.5%–3.66%	Time value, minimal credit risk, fund fees	Daily liquidity
Public BDC index (headline)	~11.7%	Trailing distribution ÷ market price	Exchange-traded, but price ≠ NAV
Large-cap BDCs (headline)	~12.6%	Trailing distribution ÷ market price	Exchange-traded
Public BDC sector (risk-adjusted)	Effectively far lower for many holders	Same loans, minus 26.6% median price/NAV discount, minus dividend cuts at 18 of 37 funds below 1.0x coverage	Priced daily but discount can persist for years
Nontraded/private BDCs (e.g., BCRED)	Marketed on trailing distribution rate	Same credit risk, plus redemption gates	Quarterly redemption windows, often gated

The Part of the Story That Doesn't Make the Marketing Slide

This is where I have to be blunt. According to a Reuters analysis of S&P Global Market Intelligence data, 28 of 53 publicly traded BDCs were loss-making in the first quarter of 2026, and the sector's average quarterly profit swung from roughly $26 million a year earlier to a loss of about $7.6 million. That's not a rounding error. That's a majority of the public universe of these lenders posting red ink in the same period they were still quoting double-digit trailing yields to shareholders.

Dig into the BDC Investor Stress Dashboard for Q1 2026 and the picture gets more specific: 32 of 41 tracked BDCs saw their NAV per share decline during the quarter, with a median drop of 2.2%. Eighteen of 37 funds were running below 1.0x dividend coverage, meaning they were paying out more than they earned from their loan books. And the median public BDC now trades at a 26.6% discount to its own stated net asset value. Read that last number twice. The same market that's efficient enough to price a T-bill to the basis point is telling you it doesn't believe the NAV BDCs are reporting for their own loan portfolios.

That discount matters more than the yield headline. If you buy a BDC trading at a 26.6% discount to NAV, you're implicitly betting that discount narrows before you need your money. If it doesn't narrow, or widens further as more borrowers stumble, your total return can lag the distribution yield by a wide margin even while the fund keeps mailing you checks. Yield and total return are not the same thing, and private credit marketing tends to lead with the former.

BCRED Is the Case Study, Not the Exception

Nontraded vehicles marketed directly to retail investors don't even give you the daily price signal public BDCs do, which sounds like a feature ("no volatility!") until you realize it just means the bad news arrives later and in one lump. AltsWire reported that Blackstone's Private Credit Fund, BCRED, cut its July 2026 monthly distribution to $0.18 per share, the second cut in nine months and an 18% reduction from early-2025 levels, while NAV slipped 3.4% since January to $23.94. BCRED is one of the largest and most heavily marketed private credit funds sold to individual investors. If the flagship product is cutting distributions twice in under a year while its NAV drifts lower, the "steady double-digit income" pitch needs an asterisk.

None of this means private credit is a scam or that every BDC is a landmine. Ares Capital and Sixth Street Specialty Lending have longer track records and better coverage ratios than plenty of smaller peers, and Fitch and Moody's have not called for sector-wide defaults. Credit selection still matters, and some managers are simply better underwriters than others. But "some managers are good" is a different claim than "the sector yield spread over T-bills is compensating you fairly for the risk," and mid-2026 data increasingly argues for the latter being false at the index level.

Why the Spread Is Compressing Even as Headline Yields Stay High

Part of what's happening underneath the surface is a genuine repricing in the private credit market itself. Research from a mid-2026 market and sector intelligence review found that spreads in direct lending widened 50 to 100 basis points over the past year while the premium private credit commands over broadly syndicated leveraged loans compressed to roughly 150 basis points, down from wider historical norms. In plain terms: lenders are demanding better terms because they're seeing more stress in borrower books, and the extra compensation private credit used to offer over public leveraged loan markets is shrinking. That's the opposite of what you'd want to see if you're being told the illiquidity premium (the extra yield you should demand for locking up money in an investment you can't easily sell) still justifies the trade.

An illiquidity premium only works for you if it's actually being paid and if you can survive not touching that money for years. Gated redemptions on nontraded BDCs are not a hypothetical. Several large nontraded real estate and credit vehicles imposed redemption limits during 2022 and 2023 stress periods, and structurally, that risk hasn't gone away just because headline yields look attractive again.

What Institutional Money Is Doing Instead

Here's the detail I find most telling, and I'll keep it brief because it deserves its own deeper treatment elsewhere. JPMorgan Asset Management has been building out MONY, a tokenized cash fund (My OnChain Net Yield Fund) designed to make the plain-vanilla, T-bill-adjacent cash trade faster to move, transfer, and settle using blockchain rails. This is not a private credit product chasing yield. It's the opposite instinct: institutional capital investing in making the boring 3.5% to 3.8% trade more efficient and more liquid, at the exact moment retail money is flowing into products that trade illiquidity for a headline number that isn't holding up on inspection. When the smart money's innovation budget goes toward improving cash management rather than reaching for yield, that's a data point worth sitting with, not just a curiosity.

The Contrarian Read

I'll say the thing the marketing decks won't. A lot of retail investors piling into double-digit-yield private credit funds right now aren't being adequately compensated for the risk they're taking relative to a money-market fund paying 3.5% to 3.66% with same-day liquidity and no NAV to mark down. The math looks compelling until you net out the 26.6% median price-to-NAV discount, the fact that a majority of public BDCs lost money last quarter, and the very real chance that your distribution gets cut like BCRED's did, twice in nine months. Strip those factors out and the "risk-adjusted" spread over T-bills for a lot of these products is a fraction of the advertised 8-to-9-point gap, and for some holders it's negative once you count the capital loss embedded in that discount.

That doesn't mean private credit has no place in a diversified portfolio. It means you should size the position like the risky, illiquid asset it is, not like a high-yield savings account with better marketing. If you can't explain why you're getting paid 12% instead of 3.8% beyond "the fund says so," you haven't finished your homework.

Frequently Asked Questions

Is a BDC the same thing as a money-market fund with a higher yield?
No. A money-market fund holds ultra-short, high-grade instruments like T-bills and commercial paper that mature near par, with essentially no NAV volatility. A BDC holds loans to mid-size, often privately held companies, and its share price or NAV can decline meaningfully if those borrowers struggle, which is exactly what happened to 32 of 41 tracked BDCs in Q1 2026.

Why do BDCs trade below their stated NAV if the NAV is accurate?
The 26.6% median discount suggests the market is skeptical that reported NAVs fully reflect the current risk in the underlying loan books. Discounts can also reflect liquidity concerns, leverage at the fund level, and general risk-off sentiment toward the sector following the wave of Q1 2026 dividend cuts and losses.

Should I sell my private credit funds and move to T-bills?
That's a personal allocation decision that depends on your time horizon, liquidity needs, and risk tolerance, and this isn't individualized advice. What's worth doing regardless is checking your fund's dividend coverage ratio, its recent NAV trend, and whether it's traded at a persistent discount before assuming the headline yield is what you're actually earning.

What is MONY and should retail investors care?
MONY is JPMorgan's tokenized cash fund, built to make short-duration, T-bill-like holdings settle and transfer faster using blockchain infrastructure. It's a signal that institutional capital is focused on efficiency in low-risk cash management rather than reaching for yield in credit markets, a useful data point on how sophisticated money is positioning, even if the product itself isn't yet widely available to retail investors.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.