NZF - Municipal CEF Update: High Yields And Wide Discounts

2024-06-14 08:23:38 ET

Summary

• Municipal CEFs have seen distribution hikes in response to activist attacks, aiming to tighten discounts and attract additional demand.
• Municipal bonds offer attractive valuations, high tax exemption value, and resilience during credit drawdowns, making them an appealing investment.
• We recently added to our muni CEF holdings on the back of these supporting tactical and strategic factors.

In this article, we catch up on the municipal CEF sector. Muni CEFs have gone through a whirlwind of distribution changes over the last couple of months, with many managers rushing through sizable and repeated distribution hikes. As we have discussed a number of times, this has mostly been in response to CEF activist attacks on the sector. Higher distributions tend to tighten discounts, and this is what the CEF managers are betting on to ward off the activists....

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