CCIA - BGT: Failing To Cover Distributions And Unlikely To Improve (Rating Downgrade)

2025-04-29 05:58:39 ET

Summary

• The BlackRock Floating Rate Income Trust offers a high yield of 12.03%, but its income is highly dependent on Federal Reserve interest rate policies.
• The fund's distribution is unsustainable due to declining net investment income and expected interest rate cuts, likely leading to a distribution cut.
• The market is expecting four interest cuts this year due to a recession setting in.
• The fund's distribution is already destroying its net asset value, and further rate cuts will make it even more difficult for the fund to sustain its current distribution.
• Investors should consider exiting the fund until the Federal Reserve stops easing monetary policy and the distribution becomes sustainable.

The BlackRock Floating Rate Income Trust ( BGT ) is a closed-end fund that aims to provide a way for income-seeking investors to achieve their goals and earn a substantial amount of income from the assets in their portfolios. The fund does a very good job at this, as it boasts a whopping 12.03% yield at the current share price. This is substantially higher than either the domestic investment-grade bond or the domestic junk bond indices:

For further details see: