Interest rates are on the rise.
music selection: “Bang Your Head (Metal Health)” — Quiet Riot
The Fed is in tightening mode. The benchmark 10 year treasury yield closed yesterday at 3.19%. The rate could realistically rise over 4% in the near term. This can be problematic for fixed income investors. So today, I’m offering a defensive play by highlighting a short duration closed end fund trading at significant discount to NAV. The short term nature makes the securities less sensitive to rising interest rates and provides an opportunity for growth of distribution as old bonds mature and get reinvested at higher rates.
Eaton Vance Short Duration Diversified (EVG) is a closed end fund that seeks high current income and capital appreciation through investment in senior secured floating rate loans, bank deposits denominated in foreign currency and US backed mortgage backed securities. It pays a managed distribution on a monthly basis.
- Discount to NAV – 13.20%
- Yield – 6.16%
- Effective leverage – 25.49%
- Expense ratio – 2.21%
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Devour your prey raptors!