Dividend-News

Weekly Review: High-Yield CEFs - ISD Has One Of The Biggest Discounts

Published Wed, 02 Jan 2019 10:40:40 -0500 on Seeking Alpha

Introduction
The opportunities in closed-end funds over the last few months caught the eye of many investors. Most of these products are designed to provide a steady stream of income, usually on a monthly or quarterly basis, as opposed to the biannual payments provided by individual bonds. And this feature continues to attract market participants even when the overall market looks unstable.
In spite of CEFs being mostly of interest to income investors, we have found our path to approach them as active traders and we are constantly monitoring them. As a testament to this, you will be kept up to date with Weekly Reviews such as the one below.
The Benchmark
The main benchmark of the sector, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) bounced back from its bottom after a $0.81 increase in its price. The ETF finished the week at $81.04 and remains pretty close to its lowest level of the year. However, it seems the credit panic is overcome and the trust in the stock market and respectively high-yield CEFs may return very soon.

Source: Barchart, iBoxx $ High Yield Corp Bond iShares
I would like to spend some time covering several advantages of high-yield bonds and closed-end funds, which invest in this asset class. As the high-yield sector generally has a low correlation to other sectors of the fixed-income market, along with less sensitivity to interest rate risk, an allocation to high-yield bonds may provide portfolio diversification benefits. In... Read more