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Why municipal closed-end funds, and why now?

johnNjohnN
in Fund Discussions
https://m.nasdaq.com/article/why-municipal-closed-end-funds-and-why-now-cm1032521


BlackRock, October 04, 2018, 05:10:55 PM EDT








Hardik Pandya / Unsplash Municipal bonds offer multiple benefits to income-seeking investors-high quality ratings, low default rates and low volatility relative to most fixed income sectors. Perhaps most of all, muni bonds are embraced by investors for their appealing tax advantages. Just do the math.

Comments

  • RbrtRbrt
    CE-Funds such as BBN have been brutalized.
    https://m.nasdaq.com/symbol/bbn

  • AndyJ
    edited October 2018
    Caution advised; Blackrock is staking its whole argument (well, in addition to the obvious tax-equivalent yield argument, which everyone who's ever read anything about t/e munis already knows) on relatively wide discounts, which in itself shouldn't be a buy recommendation.

    The opposite side of the argument is that muni CEF's, as a class, are having continuing trouble covering distributions with income, even after more than a few have cut distributions, some of them more than once in the past year. Combine that with negative UNII (undistributed net investment income) in many cases, and there are likely even more distribution cuts looming before things start looking up. Distribution cuts are poison for many CEF investors, likely leading to more selling.

    And as long as T yields are still headed up with little to no pause, a NAV or price recovery is unlikely. And then, combine all of the above with the usual late-year tax loss selling that often occurs in Q4 in CEF-land for securities with substantial losses, and Blackrock's argument for buying now is underwhelming.
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