MUNI CEF Watch

[anitya]

anitya said today:


P.S.: I have been out of fixed income CEFs for 2+ years but continue to be tempted to get back in but as chang said discounts have not expanded enough for me to bite. MUNI CEFs are at very good discounts!



Any favorite MUNI CEFs?


chang replied:

You might be right - PML has a 1-Year Z-Stat of -2.68. But I think they have further to go downward. Look at the charts, and at the historical discount/premium charts. I used to consider PMF/PML/PMX best in class. I owned some others in the past too - Nuveen, DWS, Blackrock, Pioneer. They all made money off the Whitney bottom.



I wouldn't mind if someone started a "Muni CEF Watch" thread, so I could see specific news and poster opinions and actions. This is one product which I will buy when the time is right.

[uncleharley]

Would $TNX be an appropriate index for tracking purposes? If not, what would you use for tracking?

[anitya]

uncleharley,

Movement in NAV is good to track so all parts (portfolio health and leverage costs) are covered.

As you already know, most of these are simpler compared to the PDIs.

[anitya]

Perhaps an OT, there probably are some floating rate MUNI products for those interested in playing the MUNIs complimentary to USFR and BLs.

[yogibearbull]

For tracking munis, I use the ETF MUB and ETF XMPT, an ETF of leveraged muni CEFs. Munis peaked in mid-2021 and are hovering near lows now; MUB -8.76%, XMPT -31.56%. Much of the collapse in XMPT is from widening muni CEF discounts.

Top holdings of XMPT are NEA+NAD at 16.06% (*differences are for AMT), NVG+NZF (*) at 15.45%; these trade at -16.xx% discount. HY muni NMZ is farther down the list at 3.00%; discount is -8.66%.

StockCharts, 3-yr  stockcharts.com/h-perf/ui?s=MUB&compare=XMPT&id=p52376309336

[uncleharley]

The daily charts for MUB and for XMPT are interesting. They have both had serious corrections and are now consolidating near what may become the bottom of their correction. I would wait to see a high volume break to the up side. Individual issues may look more constructive than the ETFs.

[anitya]

I had not looked at PCQ (PIMCO) in years. Now that we are talking about MUNI CEFs, I thought I would check. I do not recall it was ever in discount after 2013 (not even during March 2020). Its 53 week premium / discount high was nearly 60% premium and low was 12% discount, after distribution dropped by 50% starting Feb 2023. I am at a loss for words.

CEF Connect shows, current distribution is 5% and more than 60% of which is ROC. I would not be surprised if these ROC numbers are wrong (too high).

[anitya]

I did not check other PIMCO MUNI CEFs for their current discounts and premiums but historically, if I recall correctly, they all used to trade at a premium.

P.S.: PCM, their non-MUNI CEF, had a 52 week high premium of 50+%. Now down to 26%.

[Chahta]

Oct 16, 2023 20:10:30 GMT uncleharley said:

Would $TNX be an appropriate index for tracking purposes? If not, what would you use for tracking?

I believe it would be appropriate as a tracking index. I have heard knowledgeable muni investors talk about that. It is very apparent that munis go as TNX does.

[Fearchar]

My outlook for Muni's is negative for the near term.

Various Covid recovery programs have flooded Muni's with cash.
They have had more money than they know what to do with.
All sorts of wasteful spending projects have been funded.
So, they have been spending well beyond their ability to raise funds thru the collection of taxes.

Tightening by the FED will eventually put a crimp in spending by the US Gov't and by extension practically all the Muni's.
To properly assess Muni's, you will need to dig very deep into their financials to ferret out their credit worthiness and if they are trading at significant discount.

[FD1000]

As usual, I look for simple stuff.
The 10 year treasury signaled to sell munis and most other bond funds in mid-late May.
schrts.co/JEizVBYc

The second strong signal has been "don't fight the Fed".

[anitya]

I would keep this thread focused on MUNI CEFs. General MUNI comments may be made on the tangent (secondary comment) but not as a primary post to make sure the focus is not digressed too far from unique features of MUNI CEFs.  If there is nothing to discuss towards the primary objective, I am fine let the thread hibernate.

[anitya]

Does anybody think they plan to buy MUNI CEFs as a long term hold?

If you plan to play the premium / discount game, you are likely trading them / holding them for no more than 1-2 years. Though I had started in MUNI CEFs as a long term hold, I never really held them long term. Most of the return on investment for me was in the form of capital gains. These are generally not sophisticated enough to smooth out the ride for me vs other fixed income CEFs available in the market place to hold them long term.

[yogibearbull]

Newer Term-Structure Muni CEFs from Nuveen

I have posted on the new term-structure CEFs before (Pimco PDO, PAXS, Thornburg TBLD). Generally, these have 12-yr lives, with up to 18-24 month extensions. A tender offer may be made before the termination date and after most holders have redeemed, a small residual CEF may continue on. So, at some point, their discounts WILL disappear. Many posters avoid these newer CEFs simply because they don't have much history, but for those, one can look at their similar but older cousins. Obviously, if you wait for 10-yr history for these newer CEFs, there won't be much life remaining  .

In the link below, there is some related information on Nuveen term-structure muni CEFs - core-plus NDMO, HY NMCO.
ybbpersonalfinance.proboards.com/thread/515/cefs-newer-term-structures-nuveen

[anitya]

Thanks yogibearbull.

I would not mind making a list of HY MUNI CEFs. I have not kept up with this space. It would be great if posters could share here the HY MUNI CEFs they are aware of or better yet, share if you know a source where they are listed.

[FD1000]

I wouldn't change my analysis for Muni CEFs. The chart looks pretty bad.
schrts.co/VMXWbJQs