Tags: Closed | end | muni | funds

WSJ: Closed-End Muni Bond Funds Trading at Hefty Discounts

By    |   Monday, 21 April 2014 09:29 AM

Closed-end municipal bond funds are trading at substantial discounts to their net asset values, making them an attractive investment possibility, The Wall Street Journal reports.

Presumably the share prices of these funds will ultimately rise to match their net asset values.

The discount on the S-Network Municipal Bond Closed-End Fund Index stood at 6.87 percent March 31, according to S-Network Global Indexes, according to The Journal

Editor's Note:
Secret Wall Street Calendar Uses Strange ‘Crash Alert System,’ Gets 18.79% Annual Returns

To be sure, the discount was even higher at the end of last year — 7.29 percent.

The funds suffered in 2013 amid concern about the Federal Reserve's tapering of its quantitative easing and Detroit's bankruptcy.

But now investors are coming to realize that many states' and cities' finances are improving, and that has attracted them to muni bonds.

"There is interest-rate and leverage risk, but the 6 percent plus in tax-free income is compensating us for that risk," Nicholas LaVerghetta, a principal at NCM Capital Management, tells The Journal.

The SPDR Nuveen Barclays Capital Muni Bond exchange-traded fund, a proxy for the muni market, has generated a 4.6 percent total return on its share price so far this year.

Some experts see closed-end funds as a good way to play the muni recovery.

"This is a great time to invest" in the funds, because of their discounts Patrick Galley, chief investment officer at RiverNorth Capital Management, tells The Journal.

Many experts are bullish on munis as an asset class. "I am optimistic about the returns on municipal bonds for 2014," Jay Sommariva, senior fixed income portfolio manager for Fort Pitt Capital Group, tells the Pittsburgh Post-Gazette.

"Generally speaking, the higher the individual's tax rate, the more attractive municipals become."

Editor's Note: Secret Wall Street Calendar Uses Strange ‘Crash Alert System,’ Gets 18.79% Annual Returns

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InvestingAnalysis
Closed-end municipal bond funds are trading at substantial discounts to their net asset values, making them an attractive investment possibility, The Wall Street Journal reports.
Closed, end, muni, funds
306
2014-29-21
Monday, 21 April 2014 09:29 AM
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