2024-05-15 22:51:45 ET
Summary
- Western Asset Premier Bond Fund is a fixed income CEF with mostly investment grade holdings and a small allocation to high yield.
- WEA had a positive total return since its initial rating by me.
- We believe corporate credit spreads are currently too low and are likely to widen in the future. This widening will negatively impact bond prices, especially for a leveraged fund.
- Since interest rates are expected to stay high, we see limited potential for price appreciation in the fund. They view WEA as more of a source of current income (yield) than capital gains.
- The fund has a leverage ratio of 27% and a duration of 5.6 years, making it more sensitive to interest rate and credit spread changes than unleveraged options.
Thesis
We started our coverage of the Western Asset Premier Bond Fund ( WEA ) last year with a 'Buy' rating. When we reviewed the name, we liked the investment grade collateral with leverage on top and the wide credit spreads at the time. WEA has delivered since our rating, with a positive total return:
Initial Rating (Seeking Alpha)
Read the full article on Seeking Alpha
For further details see:
WEA: Tight Spreads Make This Fund Unappealing Currently (Rating Downgrade)