Highest Positive Spread: BlackRock New Jersey Muni Bond Trust (BLJ)
Lowest Negative Spread: Blackstone/GSO Senior Floating Rate Term Fund ((NYSE:BSL))
Focus Stock(s) of the Week: MFS Investment Grade Muni Fund (CXH)
Last Week s Focus Stock: Nuveen NJ Premium Income Muni Fund (NNJ)
CEF Weekly Review: On average, the 13 closed-end fund ((NYSEMKT:CEF)) types registered a share price decline of 0.4% for the week ending 4/13/12.
The PowerShares CEF Income Composite (PCEF), an ETF that invests in taxable income CEFs, decreased 1.0% for the week. PCEF is up 4.5% YTD on price appreciation. Currently, PCEF's trailing twelve months' yield is 8.2%. The S&P 500 decreased 2.0% during the week on a continuation of tepid share volume (see below). The S&P 500 has trimmed its gain to 9.0% YTD.
CEF Weekly Fund Type Performance: This is the third consecutive week that CEF investors favored fixed-income over equity-oriented funds. USMrtgBndFnds and SingleStMuniFnds led the fixed-income fund types with each advancing 0.7%. In the case of the former, its advance was a rebound from the previous week's decline of 1.0%. ConvtSecFnds continues to get hammered with a drop of 1.7% this week on top of a 1.9% drop the previous week. The decline was fairly broad-based.
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Of the 13 CEF fund types, both LoanPartFnds and WrldEqFnds on average experienced price declines greater than their respective NAV's. This may indicate that: 1) either there is a negative trend developing; or, 2) the fund types are temporarily oversold. Both reflect the fear of a slowing global economy, the increased prospect of lower interest rates and the hopeful prospects of QE3.
Weekly CEF Winners and Losers: One of the CEFs with the greatest positive PrcNAVSprd* for the week was BlackRock New Jersey Muni Bond Trust . As we pointed out last week, some of the CEFs with the largest negative spreads were New Jersey related muni CEFs. A number of such CEFs rebounded this week. Invesco VK NJ Investment Grade Muni Fund (VTJ) is a larger fund that experienced a similar rebound this week.
BLJ's share price advanced 4.4% while it's NAV per share advanced 0.5% generating a positive PrcNAVSprd of 3.9%. BLJ also went ex-dividend on a $0.078 per share monthly distribution this week. BLJ is a small CEF with only $56 million is in net assets and its shares are thinly traded. Its 3 month average trading volume is 5,400 shares.
The CEF(s) with the greatest negative PrcNAVSprd for the week was Blackstone/GSO Senior Floating Rate Term Fund (BSL). BSL's share price declined 3.8% while it's NAV per share remained flat generating a negative PrcNAVSprd of 3.8%.
BSL invests in floating rate senior loans and currently trades at an annualized monthly distribution yield of 6.7% and at a slight premium. It has $437 million in net assets with leverage of approximately a third of its portfolio. The stock declined on light volume.
CEF Focus Stock(s) for the Week: The focus stock this week is MFS Investment Grade Muni Fund . CXH as its name implies invests in investment grade muni bonds. The stock trades at an annualized monthly yield of 6.4% and a taxable yield equivalent of 9.8%. Despite the improved general performance of the muni CEFs over the past two weeks, CXH experienced a weekly price decline of 2.2% while its NAV advanced 0.7% generating a negative PrcNAVSprd of 2.9%.
CXH is small at $158 million and employs 29.5% of debt leverage which escalates to 32.5% when derivative positions and included.
Last Week's Focus Stock(s): The focus stock last week was Nuveen NJ Premium Income Muni Fund . NNJ was one of the stocks caught in the New Jersey muni downdraft last week. Part of the reason may have been BlackRock New Jersey Investment Quality Muni Trust (RNJ) Board's approval to liquidate the fund while it was selling at a premium.
NNJ went ex-dividend this week on March 13th and investors picked up an additional payment of $.0725 per share. Including the distribution, NNJ was up 0.8% for the week.
Joe Eqcome (Owns a diversified portfolio of CEFs and ETFs and is long stocks in the CEFBig10™ and CEFMuni10™.)
The first is a balanced equity-income portfolio (CEFBig10™) and the second a tax-exempt income portfolio (CEFMuni10™).
[*] All things being equal, price and NAV should move in tandem. A price movement greater than the NAV generates a positive PrcNAVSprd and may be interpreted as negative on a near-term basis and indicate that the stock is overvalued relative to its NAV which in theory is the stock's intrinsic value. The opposite would be true for a negative PrcNAVSprd.