2 CEFs That Can Benefit From Fed Keeping Its Target Rate Higher

2025-04-28 15:54:11 ET

Summary

• The volatile market environment due to the trade war can create opportunities for long-term investors, especially in closed-end funds (CEFs).
• First Trust High Yield Opportunities 2027 Term Fund (FTHY) and Blackstone Strategic Credit 2027 Term Fund (BGB) offer high-yield exposure with potential benefits from floating-rate investments.
• Both FTHY and BGB have seen distribution cuts due to interest rate changes, but their discounts have widened, presenting potential buying opportunities.
• While we still have 'Hold' ratings on these funds, with the overall volatility, we've seen them drop closer to our buy targets.

Written by Nick Ackerman, co-produced by Stanford Chemist

With the potential for increased inflation on the back of the tariffs being announced, the Fed's target interest rate may stay higher for longer. Although there are still expected to be some cuts before the end of 2025, those projections have come down. The trade war has also added significant uncertainty to the market, more than usual, as the current White House administration seems to continually make changes to their plans. Whether it is changing the amount, delaying, or adding exemptions, there isn't a clear message....

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