Seeking Alpha

UBS likes closed-end munis trading at NAV discounts

  • National closed-end funds are trading at an average 6% discount to NAV vs. a typical 1%, and with a yield of about 7%. Top picks are Neuberger Berman Intermediate Duration Fund (NBH +2.1%) and BlackRock Muni Income Trust (BFK +0.2%).
  • As for state funds, they're more likely to have higher exposure to Puerto Rico as - other than paper within their home state - they're also allowed to buy the bonds of U.S. territories. Those with notably higher exposure to PR are: Neuberger Berman CA Intermediate Municipal Fund (NBW -0.1%), BlackRock Muniholdings NJ Quality Fund (MUJ -0.2%) and BlackRock NY Muni Income Trust (BNY -0.2%).
  • As for the broader picture, UBS says the muni bond market has “entered into a transitional phase," in which they're no longer a "rates" product, but one valued on "credit." Not expecting a wave of bankruptcies, UBS does see an increase in the number of governments seeking protection. "We expect conventional notions regarding the homogeneity of municipal bonds to dissipate."
  • Muni ETFs: MUB, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY, NYF, PZT, INY, CMF, PWZ, CXA.
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