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Wall Street doesn’t want to touch private credit bonds without getting paid up for the risk.

Dealers are now demanding higher compensation to trade corporate bonds tied to business development companies (BDCs), as fears grow over their exposure to software firms threatened by AI disruption.

Loans to software businesses make up about 20% of BDC portfolios, according to strategists at Barclays, and that’s starting to spook markets. Shares of publicly listed BDCs have already fallen 3% this month, and now it’s hitting their debt, too.

Bid-ask spreads on five-year benchmark BDC bonds, normally tight, have blown out to as much as 20 basis points, up from the usual 5 to 10. It’s worse for smaller names and less-liquid bonds, where spreads are even wider.

The most recent primary deals from Barings Private Credit Corp. and Hercules Capital show how far pricing has changed. Barings had to offer a 15 basis point concession, while Hercules gave 10, way above the 1.5 basis point average for new bonds this year.

This shift marks a reversal from earlier in the year when BDCs could issue debt easily. Back then, tight spreads and strong demand helped push U.S. high-grade bond issuance above $200 billion in January, one of the biggest monthly totals on record.

Now, the sentiment has flipped. The release of Claude Cowork by Anthropic kicked off a broader selloff in software-related debt.

Investors are suddenly worried that AI tools will crush traditional software firms, which make up a big chunk of what BDCs lend to. Some BDCs have already taken write-downs, and outflows are accelerating.

Holiday shoppers didn’t show up like they used to. Retail sales came in flat for December, missing the 0.4% gain economists were looking for.

That followed a 0.6% increase in November, and the slowdown was blamed on rough weather, tariffs, and persistent inflation.

Without autos, it was still flat, no growth at all, versus the 0.3% rise expected. Year-over-year, sales were up 2.4%, but that’s a drop from 3.3% in November.

Take out autos, and December’s annual growth was a bit better at 3.3%, but still not enough to keep pace with inflation. The CPI rose 2.7% in December, which means real spending fell.

The pain showed up across categories. Furniture and miscellaneous retailers fell 0.9%, clothing was down 0.7%, and electronics dropped 0.4%.

Even online shopping barely budged, up just 0.1%. The only real winner? Building materials and garden stores, which saw a 1.2% gain.

While high-income shoppers kept spending through most of 2025, lower-income households pulled back, and now the full-year trend is starting to reflect that. The Atlanta Fed’s GDP tracker was pointing to a 4.2% Q4 growth rate, but that could drop after this retail report.

The soft spending numbers land right before Wednesday’s January jobs report, where forecasts are already soft. Economists expect 55,000 new jobs, down from 50,000 in December, and some firms think the final number will be even weaker after revisions.