Another Pimco income fund trading at a premium to NAV gets hit - today the Pimco California Municipal Income Fund II (PCK -4.9%). Today's decline still leaves it at a 12% premium to the end of May's NAV at a time when the average muni CEF is trading at discount. Three noteworthy ones: NUV, NPM, MQY.
Not limited to mortgage REITs, panic grips another favorite of income investors, closed-end investment funds - notably those trading far above NAV for seemingly no other reason than their fat yield. The payouts on many of these are sustained by digging into capital rather than by earning a return on it. PGP -7.5%, PHK -7.8%, PHT -5.5%.
Blinded by fat yields, investors continue to bid closed-end funds far higher than their NAVs. 66% of taxable and 73% of muni-bond funds trade above NAV now, compared to just 30% a year ago, with often the funds with the highest distributions having the highest premiums. "We believe that an excessive premium for the fund is not likely to be sustainable," says Gabelli of one of its funds. Are investors listening?
Provides current income exempt from federal and California State income tax. Under normal market conditions, the Fund will invest substantially all (at least 90%) of its total assets in municipal bonds that are exempt from federal and California income tax