3 CEFs Yielding 7.5 To 9.8% Valued To Buy This Week

Anyone who follows closed-end funds will know valuations have been losing ground all year. Discounts have been shrinking. The one-year median discount for taxable CEFs (n=376) is -5.9% while the one-month median is -4.4%.
But not all CEFs are losing discount. For some high-yielding CEFs, recent moves over the past several weeks have reduced premiums or deepened discounts, potentially creating opportunities. I'll discuss three of these here.
Five from PIMCO. Which One's the Winner? Readers who follow my work on Seeking Alpha will not be surprised to hear that one of my three choices comes from PIMCO. PIMCO's CEFs have been battered at bit lately, primarily over investor fears that declining levels of distribution coverage from net investment income (NII) raise the specter of distribution cuts. For several funds of interest, I find these fears unjustified for reasons I'll discuss.
If we look at valuations for the eleven PIMCO CEFs we see a clear break into two groups separated by being above and below a line drawn at a 10% premium. The above the line group includes six funds. I'll look only at the five below that line. One has a discount and four have premiums under 4%. These five are: PIMCO Dynamic Credit Income (PCI), PIMCO Income Opportunity (PKO), PIMCO Income Strategy Fund II (PFN), PIMCO Income Strategy Fund (PFL), PIMCO Dynamic Income Fund (PDI). Each has a distribution yield over 8.7%.

This chart shows the declines in premiums for the... Read more