Weekly Municipal Bond CEF Trades: A Fund With A 5.54% Yield Trading At A 10% Discount

Published Wed, 12 Sep 2018 21:29:15 -0400 on Seeking Alpha

Introduction Closed-end funds do not seem like the best place to be for active traders, at least on paper. However, these products have been our bread and butter for a while now, and as long as we are capable of detecting opportunities and successfully acting on them, we intend to keep on rolling.
Active followers have taken note of the 'Weekly Review' series, and it would only be appropriate to complement these articles with a follow-up, like this one, whose goal is to highlight the funds of interest to us.
Statistical Comparison And Potential Trades Over the past week, the price of the main index - iShares National AMT-Free Muni Bond ETF (NYSEARCA: MUB) plummeted. In short, the past week was unfavorable for most of the fixed income instruments. The recent sharp falling could be considered as the end of the steady recovery, which was started at the end of April.
An important factor which should be taken into consideration is the 10-year Treasury note yield and the fact that it is pretty close to the psychological levels of 3%. In the previous times when we saw a breakout of that level, it was accompanied by a decrease in the price of the main municipal bond CEFs benchmark. The US Treasury yields have a crucial role in the performance of the sector. Munis are sensitive to the changes in the interest rates because their portfolio is comprised of assets with longer maturity compared to high yield bonds, for example. Respectively, municipal bond CEFs have a higher... Read more