I imagined it may possibly aid if I shared this slide presentation from Nuveen so that shareholders and opportunity investors alike could learn a minor bit much more about the municipal bond current market and with any luck , deliver some viewpoint throughout this hard price rise period.
What is the main worry with municipal bond resources right now? Properly, that is dependent on no matter if you possess personal municipal bonds, municipal bond mutual money/ETFs or if you possess municipal bond CEFs.
If you very own true municipal bonds, you might be probably rejoicing right now with the much larger yields you can get throughout all ratings from AAA to superior generate munis. But if you personal municipal bond resources, it really is a bit a lot more difficult.
From a municipal bond ETF fund and mutual fund standpoint, the problem would seem to be largely shareholder redemptions and lowered liquidity which has resulted in a responses loop in which selling by anxious shareholders begets extra providing as price ranges go down. This has put ongoing downward pressure on municipal bond prices and hence, on municipal bond CEF NAVs far too.
But from a municipal bond CEF point of view, liquidity does not look to be substantially of an difficulty as there is an active buying and selling marketplace for municipal bond CEFs and the high tax-free yields they present. Without a doubt, the biggest hazard for muni bond CEFs is genuinely the unfold among shorter-term fascination costs and more time-expression fees since these money are hugely leveraged and use shorter-phrase swap costs to get longer-expression securities.
The excellent news is that with the dramatic drop in municipal bond price ranges this calendar year, traders and portfolio managers alike can exchange maturing or named securities with a lot increased yields than what the markets made available just previous 12 months or in advance of. Thus, there is mostly an offset with the rise in shorter expression fees as long as shorter-term rates you should not increase speedier than for a longer time-expression fees resulting in an inverted generate curve.
In any function, I hope the slide presentation is of price to you and many thanks to Nuveen for forwarding it to me:
Thank you for examining my report. My aim is to give you observations and actionable ideas in Closed-Stop resources whilst educating you on how these exceptional and opportunistic funds get the job done.
CEFs can be a person of the most exhilarating and still most aggravating safety classes to commit in, and it is vital that you have another person who can be a degree head for the duration of up and down durations of the market place. I hope to be that voice of tranquil when important. ~ Douglas Albo