- A sharp sell-off to start the year has pushed down municipal bond valuations and muni closed-end funds to discounts, presenting an attractive entry point for investors seeking tax-exempt income.
- Muni CEFs borrow money at short-term interest rates and invest the proceeds in muni bonds that pay higher yields, increasing earnings of the fund and supporting higher distributions relative to a muni bond or mutual fund.
- Because muni CEFs borrow at short-term interest rates and typically invest in muni bonds with longer maturities, a flatter yield curve (i.e. narrower spread) could negatively impact the earnings of a leveraged CEF.
For further details see:
Is It Time To Consider Muni Closed-End Funds?