MFOHome About Commentary Discussions Funds The Best Resources Support Us!

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In Register

Categories

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Foreign investors power the Muni market

JunksterJunkster
edited September 2014 in Fund Discussions
http://www.bondbuyer.com/news/markets-buy-side/foreign-investors-build-muni-market-clout-1066282-1.html

Yesterday there was a negative article from Bloomberg about a possible spike in muni supply next month. Then later in the evening was this lengthy, but very informative, article about how foreign investors have been piling into our domestic muni market.
All the more reason to simply let price be your guide and ignore the outside noise. Albeit, I will admit you do need fundamentals to underpin the technical moves (whatever the market may be) And as we see in the link above, the dwindling supply of munis in the face of increased demand has been one of the major fundamental drivers.

Nice move today so far in the junk muni ETFs (HYMB and HYD - neither of which I would touch with a ten foot pole) and some of the open end junk munis funds may see YTD highs today.

Comments

  • rjb112
    Junkster said:

    http://www.bondbuyer.com/news/markets-buy-side/foreign-investors-build-muni-market-clout-1066282-1.html

    Nice move today so far in the junk muni ETFs (HYMB and HYD - neither of which I would touch with a ten foot pole) and some of the open end junk munis funds may see YTD highs today.

    @Junkster, what is it about those junk muni ETFs that makes you say you wouldn't touch them with a ten foot pole? I notice they are doing well YTD, especially HYMB
  • JunksterJunkster
    edited September 2014
    Robert, it's their volatility as well as having to deal with bid/ask spreads which can be wide in something as thinly traded as HYMB. In the mini selloff in junk munis in early July, HYD sold off over 4% early that month (closing highs to intraday lows) while HYMB sold of over 3%. Yet the open end barely sold off over 1% while EIHYX didn't even sell off 3/4 of a %. Not including today, HYD is up only 12.20 YTD while the big three in the open end are up between 14.22% to 15.01%. HYMB is up 13.74% but again, wide spreads on a thinly traded product.
  • rjb112
    edited September 2014
    Junkster said:

    In the mini selloff in junk munis in early July, HYD sold off over 4% early that month (closing highs to intraday lows) while HYMB sold of over 3%. Yet the open end barely sold off over 1% while EIHYX didn't even sell off 3/4 of a %.

    HYD has 646 bonds in the fund, so it must have been the general asset class itself that sold off, no? Maybe the pertinent question is, how did EIHYX manage to not sell off like HYD? Was it the active management and bond selection? HYMB has 325 bonds, again implying that it was the asset class that sold off, and somehow EIHYX was protected.

    I don't see any leverage in these etfs. They are not closed end funds.
  • tjacobx
    This article from Barrons provide some insight into issues with HYMB
    http://online.barrons.com/news/articles/SB50001424053111904780504580049990149821472
  • JunksterJunkster
    edited September 2014
    >>I don't see any leverage in these etfs. They are not closed end funds.<<<

    Robert, the open end are priced end of day at NAV. The ETFs can trade all over the place intraday - premium or discount to NAV - depending on what the hope or fear of the day is. Declines are magnified in the ETFs with everyone rushing to sell. That's what occurred in early July. The most egregious example of why I have such a dislike for ETFs occurred that infamous day in May of 2011.
  • Dex
    Junkster said:

    having to deal with bid/ask spreads which can be wide in something as thinly traded as HYMB. In the mini selloff in junk munis in early July, HYD sold off over 4% early that month (closing highs to intraday lows) while HYMB sold of over 3%.

    @Junkster,
    I have a large position in HYD and the bid/ask is a two edge sword. I have put in low market limit buys in and got some of them filled. Also, after the dividend is paid, I've noticed HYD does decline some. It could be people buying the dividend and then some selling.
    I also have NHMAX that I bought when Fidelity waved the front end load of 4.2% - I just can't bring myself to pay a load.

    YTD HYD is doing better then HYG
    http://finance.yahoo.com/echarts?s=HYD+Interactive#symbol=HYD;range=1y





  • beebee
    edited September 2014
    @Junkster,

    Not sure if you caught this interview with John Miller from Nuveen:
    advisorperspectives.com/videos/Investius-Muni_Issues_featuring_John_Miller.php?WT.rss_f=CommentaRSS&WT.rss_ev=a&WT.rss_a=Muni_Issues_featuring_John_Miller
Sign In or Register to comment.