NZF - Will Bankruptcy Era Prices Finally Stop The Bleeding In Municipal Bond CEFs?

• There have been several periods over the last 10 years in which municipal bond CEFs have dropped -20% or more at market price, not including distributions.
• Before this year's rout, the most recent was during COVID-19. Before that, it was the period in late 2018 when the Federal Reserve raised interest rates one too many times.
• But it's the period during the fourth quarter of 2013 which piqued my interest since this was also a time when municipalities were making headlines about bankruptcies and defaults.
• During that late 2013 period, a perfect storm of rising interest rates, pension fund shortfalls, city and state deficits and even Congress considering the elimination of the tax-free status of municipal bonds had municipalities threatened with credit rating cuts and even talk of bankruptcy proceedings.
• As you might expect, municipal bonds, one of the most conservative investments next to treasuries, were trading like junk bonds during this era so you can imagine what leveraged municipal bond CEFs were trading at. We are now at those same prices.

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