Published Mon, 01 Jun 2020 07:16:59 -0400 on Seeking Alpha
The UBS ETRACS website has the current yield for LMLB at 34.69%.
This is distorted because it uses some data from before the March 2020 crash, but even adjusting for that a current yield of 23% is likely.
Some of the remaining 2x Leveraged ETNs may present opportunities for those willing to assume the inherent risks.
The Current Status of High Yielding 2x leveraged ETNs With treasury interest rates at their lowest levels ever, some investors seeking higher yields are turning to leveraged instruments. High yielding MLPs and mREITs, typically own assets that generate cash flows over relatively long time periods, such as pipelines and mortgages. The higher yielding MLPs and mREITs generally use leverage to increase their current yields. Other than very distressed junk bonds and preferred stocks, the highest current yields now available are from 2x leveraged ETNs. UBS Group AG (UBS) sponsors a number of 2x leveraged ETNs under the brand name ETRACS. These implicitly borrow at a short-rem interest rate based on LIBOR.
LIBOR is near an all-time low. Furthermore, the prospects that the Federal Reserve will be raising interest rates anytime soon is extremely remote. This makes the extra yield obtained from carry-type trades financed by short-term borrowing very high. The ETRACS Monthly Pay 2xLeveraged Wells Fargo MLP Ex-Energy ETN Series B (LMLB) is now the highest yielding ETN shown on the UBS ETRACS website.
The current yield (annualized) shown for LMLB is now 34.69%. This is slightly higher than ETRACS Monthly Pay 2x Leveraged US Small Cap High Dividend ETN (SMHD) that has a current yield (annualized) of 34.67%. Some might wonder why the highest yielding of the UBS ETRACS is now based on an index of all non-energy master limited partnerships listed on the New York Stock Exchange, NYSE MKT or Nasdaq that satisfy market capitalization and other eligibility requirements.
In February 2020, other UBS ETRACS had higher current yields than LMLB. These were 2x... Read more