Weekly Review: Municipal Bond CEFs - The 10-Year Treasury Yield Dropped To Its Lowest Level Since 2017

Published Wed, 29 May 2019 20:25:04 -0400 on Seeking Alpha

Introduction
Over the past few months, most of you have noticed our increased activity in closed-end funds as the inflow of volatility finally shook them up and created various arbitrage, and directional, opportunities for active traders like us.
Currently, we are cautious when we choose our long positions as most of the closed-end funds which hold municipal bonds have lost their statistical edge and are traded at positive Z-scores. However, there are several interesting pair trade opportunities which can be traded. For the conservative market participants with longer investment horizon, I still see interesting dividend opportunities which are traded at high discounts.
The Benchmark
Once again, the benchmark of the municipal bonds showed how strong is the impulse of the current upward trend. On a weekly basis, the iShares National AMT-Free Muni Bond ETF (MUB) remained in a green territory with a $0.07 increase in its price.
The main index started a new uptrend at the beginning of November 2018 and continues to conquer new highs. The last time when we saw the benchmark traded at these levels around $112.50 per share was in October 2016.

Source: Barchart.com - iShares National AMT-Free Muni Bond ETF
The 10-year Treasury yield dropped to lowest levels since 2017 last week as trade war fuels economic worries. Generally, the falling of the yields is a positive fact for the municipal bond closed-end funds as they hold assets with relatively high... Read more