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I can't believe how terribly late to the party Barron is, muni CEFs are trading with a one year z-score of 2-3.... if this article leads to another jump, i'll be a seller.
"As munis have climbed in value, yields have fallen. The average high-rated intermediate term municipal bond yields just 1.6%. After-tax, that’s still way better than a 10-year Treasury, but not a lot of income.
One solution to the income dilemma is to buy a closed-end muni fund. Because many of them use leverage (borrowing short-term to buy longer-term bonds) they average 5% yields. The funds typically trade at discounts to net asset value, but those have narrowed substantially in the past year, boosting returns. The average total return in this niche is 11% over the last 12 months, reports Morningstar."
It is odd to me that Amey Stone would recommend (indirectly, via one of her blog's commenters) CEF munis that are about to be merged into another fund, which after all the fusions will have a different investing mandate. This imminent change is noted not only in the article itself, but also in another article she posted just one day earlier: http://blogs.barrons.com/incomeinvesting/2016/04/08/nuveens-closed-end-muni-fund-mergers-near-completion/
It is as if she thinks multiple fund mergers/consolidations should be considered by investors as a non-event, amounting to nothing much. That hasn't been my experience. Sometimes they don't, but sometimes they do, in a very significant way. And if they do in this case, and the tide goes out..... well, you could be stuck in a suddenly very illiquid investment.
Comments
"As munis have climbed in value, yields have fallen. The average high-rated intermediate term municipal bond yields just 1.6%. After-tax, that’s still way better than a 10-year Treasury, but not a lot of income.
One solution to the income dilemma is to buy a closed-end muni fund. Because many of them use leverage (borrowing short-term to buy longer-term bonds) they average 5% yields. The funds typically trade at discounts to net asset value, but those have narrowed substantially in the past year, boosting returns. The average total return in this niche is 11% over the last 12 months, reports Morningstar."
google search results here
Regards,
Ted
http://blogs.barrons.com/incomeinvesting/2016/04/08/nuveens-closed-end-muni-fund-mergers-near-completion/
It is as if she thinks multiple fund mergers/consolidations should be considered by investors as a non-event, amounting to nothing much. That hasn't been my experience. Sometimes they don't, but sometimes they do, in a very significant way. And if they do in this case, and the tide goes out..... well, you could be stuck in a suddenly very illiquid investment.