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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (50847)	2/11/2013 6:01:23 PM
From: MCsweet	1 Recommendation Respond to of 78476

What's more, when bonds go south closed-end funds will get hit worse than open-end bond funds. First, closed-end funds employ leverage and will get a bigger hit to NAV. Closed-end funds have been starting to cut dividends and will need to cut them more when short rates go up (high coupon bonds getting called in doesn't help either). Lower NAVs and lower dividends could lead closed-end funds to trade at large discounts (versus around par where most are now), hitting the price even further. I think 5.5% tax free from a municipal closed-end fund is really attractive here, but when the market turns, and I have no idea when that will be, they are not a place you will want to be IMO. MC

To: E_K_S who wrote (50847)	2/11/2013 6:04:42 PM
From: Wallace Rivers	Read Replies (1) \| Respond to of 78476

"Bonds tend to move in price inversely with the 10 year U.S. treasury rate. The Fed's QE policy is artificially driving down the 10 year treasury yield lower making your municipal bonds increase in value. Over the last few days the 10 year yield surpassed the 2% ceiling rate making several of the bond fund fall in value." I understand that principal rises if yields drop. Too bad I wasn't a buyer of a bunch of 10 or 30 year treasuries 5 or so years ago. My point is that these closed end and open end municipal bond funds have dropped 5%-10% in the past month, I think the reason being people are fearful of the administration changing tax rules concerning munis. Anyone who might have any other reasons, that would be great to hear. In the mean time, this could be a nice buying opportunity.