Published Tue, 30 Jun 2020 10:44:19 -0400 on Seeking Alpha
Seeking AlphaClosed End FundsMunicipal CEF Yields Remain AttractiveJun. 30, 2020 10:44 AM ET|| Includes: MHD, MUSby: ADS AnalyticsADS Analytics Systematic IncomeIncome investing across CEFs, ETFs, preferreds, baby bonds and more.SummaryThe municipal sector remains an attractive choice for income portfolios.
Relatively high quality, decent yields and attractive CEF discount valuations argue for an allocation to the sector.
We highlight MUS - a fund that has a strong earnings profile due to reduced leverage costs.
The sharp rally we have seen across markets since the end of March is presenting a challenge to income investors. Yields across sectors are well below their highs during the March drawdown and CEF discounts have tightened making obvious bargains much more difficult to find. Add to this the fact that a number of states are beginning to reverse or slow their reopenings making the riskier parts of the income investment space vulnerable to a sharp sell-off.
One area of the income market that remains attractive is the municipal sector, particularly the cross-over rated space, that is, bonds having low investment-grade and high high-yield ratings. In this article we take a look at the tailwinds and features of this sector. Our main takeaway is that decent underlying bond yields, reduced leverage costs, higher quality profile, strong demand and attractive CEF discount valuations make this part of the income market attractive.
We also highlight the BlackRock MuniHoldings Quality Fund (MUS) which boasts a high-quality portfolio, attractive discount valuation and a strong income trajectory due to its ability to maintain a high level of leverage and low leverage costs.
Attractive Underlying Bond Yields
In the chart below we plot a number of S&P index yield-to-worst figures, specifically the major municipal indices as well as the Treasury bond index. The chart shows that higher-quality indices such as the Treasury, municipal and taxable sectors have... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|BLACKROCK MUNIHOLDINGS FUND||16.27||0.0||0.00||0.00||4.64|
|BLACKROCK MUNIHOLDINGS QUALITY FUND||12.68||0.0||0.00||0.00||4.18|
Older articles featuring Blackrock Muniholdings Fund (MHD):Treasury Yields Were Little Changed In Low Volatility - Muni Fortnightly, June 22, 2020
Treasury Yields Little Changed In Low Volatility - Muni Fortnightly, June 1, 2020
Treasury Yields Mixed With Curve Steepening - Muni Fortnightly May 11, 2020
Treasury And Municipal Yields Extremely Volatile - Muni Fortnightly March 30, 2020
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