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Reviewing The Latest UNII/Coverage Of BlackRock And Nuveen CEFs



  • We go through Nuveen taxable and muni CEFs looking at coverage ratios, UNIIs, and trends.
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(This report was published on April 29 to members of Yield Hunting. All data herein is from that date except the commentary in the update near the end.)

Both BlackRock and Nuveen have reported their UNII and coverage data for March. The data is a bit different as the Nuveen muni CEFs showed significant declines in coverage as they likely had to delever from the spike in SIFMA funding costs. BlackRock didn't show those same kinds of declines to coverage although some funds did drop more than typical.

For reference on Nuveen, please see "Municipal CEF Distribution Cuts Coming" as it goes through the issue of Nuveen muni CEFs. We wrote:

In all likelihood, Nuveen was a forced seller at bad prices. Why were they forced to sell? The SIFMA Muni Swap Index which is essentially their benchmark for borrowing to apply leverage, spiked in March as liquidity dried up. It hit 5.12% on March 23rd, the highest since the 7.96% reached in September 2008 shortly after Lehman failed.

Since then, the SIFMA index has plummeted which allowed them to not have to be forced sellers and even raise distributions.

We go through each section of the UNII reports, taxable and tax-free, among the two largest sponsors of closed-end funds.

Nuveen Taxable Bond CEFs Analysis

The Nuveen taxables showed nice improvement in the month of March with floating rate moving coverage up nicely. The S&P 500 LSTA Leveraged Loan average price rose to $86, from the low $70s, at the depths of the market turmoil helping boost NAVs. But that has no effect on coverage ratios. We likely have seen significant reductions in funding costs which would have had a positive effect on coverage. Also, spreads widened dramatically in March, allowing for the addition of much higher yielding positions into the portfolio, helping to boost net investment income.

Data by YCharts

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Data by YCharts

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This article was written by

Alpha Gen Capital profile picture
Targeting 8+% Income Stream using CEFs, ETFs, Munis, Preferreds and REITs
Yield Hunting: Alternative Income Opportunities is a premium service dedicated to income investors who are searching for yield without the high risk of the equity market. We are one of the top experts in closed-end funds ("CEFs") in the country having spoken at many national conferences on how to incorporate CEFs into client portfolios. We manage four portfolios that investors can follow:

- YH Core Income Portfolio: yield ~8%
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- YH Taxable Core Portfolio: yield 5.24% (some tax free)
- YH Financial Advisor Model

Plus: Muni CEF Shopping List.

Our team includes:

1) Alpha Gen Capital - I am a former financial advisor and investor. Not someone from another career doing this on the side. My analysis is meant to provide safe and actionable insight without the fluff or risky ideas of most other letters. My goal is to provide a relatively safer income stream with CEFs and mutual funds. We also help investors learn about investing and how to properly construct a portfolio.

2) George Spritzer - Another career financial guru who runs a registered investment advisor with a specialization in closed-end funds for individuals. George uses the following investment strategies:1) Opportunistic Closed-end fund investing: Buy CEFs at larger than normal discounts to NAV and sell them when the discounts narrow. 2) Exploit special situations: tender offers, fund terminations, fund activism, rights offerings etc.

3) Landlord Investor- spent his career as a management consultant for public sector clients at a multinational consulting firm in the DC area. He has transitioned to a new career as a full time landlord. His investment portfolio is comprised of two parts -- broad-based index funds and income plays such as preferred stock, CEFs, and REITs. He also owns individual/baby bonds which he buys on margin to boost total return. Landlord is our 'individual preferred stock' expert analyst.


Analyst’s Disclosure: I am/we are long BBK, NEA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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