BTZ - BTZ: A Hold For Now Given Where Credit Spreads Are 9.4% Yield

2024-06-19 08:48:52 ET

Summary

• This analysis argues that BTZ, a BlackRock fixed income CEF, is not a good buy right now despite its attractive yield.
• The analysis highlights that current credit spreads are historically low, and when they widen (which is expected), it will negatively impact BTZ's price.
• A significant portion of BTZ's distribution comes from ROC, which essentially returns investors' own money and can erode the fund's NAV over time.
• The discount to NAV, which represents a potential buying opportunity, has narrowed recently, making it less attractive.
• While BTZ has a large allocation to investment-grade corporate bonds, it also holds a substantial amount of high-yield bonds.

Thesis

We have not covered the BlackRock Credit Allocation Income Trust ( BTZ ) in almost two years, so we are revisiting this fixed income CEF from BlackRock in light of the significant changes in the market that have occurred during the period....

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