A closed end municipal bond fund at steep discount to NAV.

music selection:  “Fool Like You” — Ozzy Ozbourne

Many investors are looking for safety and yield right now.  A great place to look is the municipal bond space.  These bonds pay a reliable yield that is exempt from federal income tax, boosting the after tax return.  And the safety can’t be beat.  For the longest period of history I can find, 1970 to 2016, munis defaulted at a rate of 0.07%.

Today, I’m recommending a closed end fund.  Closed end funds have a fixed quantity of shares unlike an ETF and can trade at a discount to the underlying value of assets they hold.  That is the case with today’s recommendation.  Historically, this name trades at a 6% or so discount to NAV but recently, it trades for more than 10% discount.  There is a good opportunity for some capital gains from reversion to mean in a very sleepy asset class.  And you get paid monthly to wait.  And all of the bonds in today’s pick are investment grade.  There is virtually no risk here.

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

  • Discount to NAV – 10.29%
  • Yield – 5.11%
  • Effective leverage – 39.82%
  • Expense ratio – 2.05%
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Devour your prey raptors!

Municipal Bond Opportunity in IIM

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