Three closed end municipal bond funds with attractive pricing and yields.

music selection:  “The Wanton Song” — Led Zeppelin

Each Friday, I cover a topic somehow related to fixed income, debt investing, preferreds or similar instruments.  I personally keep a 40% allocation to income investments in early retirement.  By strategically selecting income investments, I am able to cover 120% of my annual budget with just this 40% allocation.  The rest is available to do the heavy lifting of overcoming inflation in a long retirement.

This Friday, I am sharing three closed end funds that are invested entirely in investment grade municipal bonds.  They have been chosen for being attractively priced and yield rich.  These funds are federal tax exempt.  They also represent an enormously safe way to invest while handily outpacing the typical earnings on cash and near cash investments.

BlackRock Muni Enhanced (MEN) is a closed end fund that seeks current income exempt from regular Federal income tax through investment in investment grade municipal bonds.  I pays an Income Only distribution on a monthly basis.

  • Discount to NAV – 12.46%
  • Yield – 5.85%
  • Effective leverage – 40.34%
  • Expense ratio – 2.05%
  • Learn more

Invesco Advantage Municipal Income Trust II (VKI) is a closed end fund that seeks high current income exempt from Federal income tax with capital preservation through investment in investment grade municipal securities.  It pays an Income Only distribution on a monthly basis.

  • Discount to NAV – 12.48%
  • Yield – 5.94%
  • Effective leverage – 41.63%
  • Expense ratio – 2.21%
  • Learn more

Invesco Municipal Opportunity Trust (VMO) is a closed end fund that seeks current income exempt from Federal income tax through investment in investment grade municipal bonds and inverse floating rate obligations.  It pays an Income Only distribution on a monthly basis.

  • Discount to NAV – 12.44%
  • Yield – 5.98%
  • Effective leverage – 41.57%
  • Expense ratio – 2.18%
  • Learn more

Devour your prey raptors!

Friday Fixed Income – Focus on Municipals

Never miss another opportunity to devour prey!

2 thoughts on “Friday Fixed Income – Focus on Municipals

  • December 15, 2018 at 6:13 pm
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    I wonder if a wave of defaults / downgrades to junk in the corporate sector would contagion over to munis?

    A 2% fee is a lot to pay for a bond fund. The underlying assets would need to yield 8% just to cover the fee plus ~6% dividend while not drawing down principal. The discount helps, as does leverage, but these still must be funds of 5-7% yielders. With IB’s margin rate of 3.68%, there’s a case for buying the bonds directly and managing your own leverage.

    Not to bird-poop on the ideas, just thinking critically.

    Reply
  • December 19, 2018 at 4:43 am
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    I agree with Chris B.-seems like a high fee to pay for the bonds, even considering the federal tax exemption. You could always invest in muni bonds in your state/county, and also get the state-income tax free benefit, as well.
    It doesn’t seem like that would be the case for the muni bond closed funds. But this is me…I’m still trying to find a good one for the State of Hawaii….but knowing what I know, the current one on offer is for their rail project, and I’m not too confident in the Moody’s rating (no matter what the advertisements say).

    Reply

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