The 30-year U.S. Treasury bond futures has a parabolic wedge top on its weekly chart, notes Al Brook...
5 Muni Bond Funds with High Yields at a Discount
08/17/2018 5:00 am EST
If you're looking for tax-free yields, municipal ("muni") bonds can provide you with 5%+ distributions that Uncle Sam won't touch, asserts income expert Brett Owens, editor of Contrarian Outlook.
With rates rising, it is a bit tricky to make savvy buying decisions at the moment. But income investors buying smartly today are banking 5%+ yields - and paying as little as 88 cents on the dollar!
For quick profits, it's best to buy munis after mini-panics. They seem to happen every year or two, presenting us levelheaded contrarians with safe yields for cheap.
For longer-term income investors looking for steady monthly paychecks, the best time to buy munis is usually anytime — especially for those in a high tax bracket.
Buying a closed-end fund (CEF) is even easier than buying individual muni bonds. We simply enter the ticker in an online brokerage account, click the "Buy" button and we've got a fund with a handpicked portfolio of 900+ muni bonds (and monthly distributions to follow).
Our tax-free distributions get even better when we buy at a discount. Because CEFs each have a fixed share count, they can trade above and below their net asset values (NAVs). An 8% discount, for example, means we're buying $1 worth of munis for just $0.92.
Let me give you five muni funds that are bargains today. All five pay 5% or more, are exempt from Federal taxes and trade for a 6% to 12% discount to the value of their underlying bond portfolios.
BlackRock MuniYield (MYD), yielding 5.4% with a discount to NAV of 6.2%
Invesco Value Muni Income (IIM), yielding 5.3% with a discount to NAV of 10.2%
Nuveen AMT-Free Municipal Credit Income (NVG), yielding 5.3% with a discount to NAV of 8.1%
Nuveen Quality Muni Income (NAD), yielding 5.2% with a discount to NAV of 11.9%
Invesco Muni Investment Grade (VGM), yielding 5.1% with a discount to NAV of 10.4%
These funds have also been excellent long-term investments. This is important because, in my experience, past performance is the best indicator of future results in CEF-land.
This is especially the case for munis, where the best managers consistently deliver "alpha" thanks to their unfair advantages (connections and capital) in this less-than-efficient corner of the market.
Related Articles on BONDS
After a month-long rally taking Treasuries to historic low yields, bonds have reversed course, notes...
While zero U.S. interest rates are unlikely, the bond rally will have one more leg up before its lon...
While many analysts have pointed to the yield curve inversion as an omen for a potential recession, ...