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via Seeking Alpha A tripling of the market over the last five years has made it a difficult environment for value investors looking for ideas, writes Tsachy Mishal; difficult, but not impossible. Mishal has recently put money to work Muni Bond Closed End Funds Catalyst: End of tax loss selling Municipal bond closed-end funds are getting it from both sides - fears of higher rates and credit worries. Throw tax-loss selling into the mix and many are now trading at near-10% discounts to NAV and yielding almost 7% - the taxable equivalent of over 10%.
Municipal bond closed end funds (muni CEFs) are down as much as 30% from their highs in some cases. Fed tapering and headlines from Puerto Rico and Detroit have brutalized the municipal bond market and muni CEFs even more so. This leaves many muni CEFs trading at high single digit discounts to NAV and yielding nearly 7%, which is the taxable equivalent of over 10%.
I believe that scary headlines like those in Puerto Rico and Detroit are outliers. For the most part municipal finances have improved over the past year as tax receipts have grown along with the economy. One could even argue that municipal bonds value versus treasuries should be higher than ever as tax rates are higher so the tax advantage has grown. Municipal bonds offer the best after tax, risk adjusted return of any asset class. Once tax loss selling ends the market should begin to recognize this. I am long NRK VMO VKQ PMO NAN Posted on Seeking Alpha by Tsachy Mishal at 12/27/2013 06:22:00 AM T A M Capital http://www.tamcm.com/#!strategy http://www.capitalobserver.com/
There's been numerous articles on this subject recently, is anyone playing this opportunity? If so, what have you found attractive? I've been looking at various muni CEFs and it's been challenging to find one that I'm comfortable with. Most have durations above 15 which makes me uneasy. Two that seem interesting are NID and NIQ which are intermediate term funds and designed to liquidate after 10 years, some time in 2023, they have durations between 9 and 10. There's no guarantee that duration will taper as the term progresses.
Comments
A tripling of the market over the last five years has made it a difficult environment for value investors looking for ideas, writes Tsachy Mishal; difficult, but not impossible. Mishal has recently put money to work
Muni Bond Closed End Funds
Catalyst: End of tax loss selling
Municipal bond closed-end funds are getting it from both sides - fears of higher rates and credit worries. Throw tax-loss selling into the mix and many are now trading at near-10% discounts to NAV and yielding almost 7% - the taxable equivalent of over 10%.
Municipal bond closed end funds (muni CEFs) are down as much as 30% from their highs in some cases. Fed tapering and headlines from Puerto Rico and Detroit have brutalized the municipal bond market and muni CEFs even more so. This leaves many muni CEFs trading at high single digit discounts to NAV and yielding nearly 7%, which is the taxable equivalent of over 10%.
I believe that scary headlines like those in Puerto Rico and Detroit are outliers. For the most part municipal finances have improved over the past year as tax receipts have grown along with the economy. One could even argue that municipal bonds value versus treasuries should be higher than ever as tax rates are higher so the tax advantage has grown. Municipal bonds offer the best after tax, risk adjusted return of any asset class. Once tax loss selling ends the market should begin to recognize this. I am long NRK VMO VKQ PMO NAN
Posted on Seeking Alpha by Tsachy Mishal at 12/27/2013 06:22:00 AM T A M Capital
http://www.tamcm.com/#!strategy
http://www.capitalobserver.com/