- Discounts on the funds are wider than historical average
- Retail buyers may still be shellshocked from bond-market slide
Investors looking for bargains in the municipal-bond market may find opportunities in closed-end funds that don’t borrow to boost returns.
Unlevered municipal bond closed-end funds traded at a discount to their net asset value of as much 12.6%, according to data compiled by Bloomberg. The biggest, Nuveen LLC’s $1.9 billion Municipal Value Fund, is trading at a 7.2% discount with a tax-exempt yield of 3.97%. Over 20 years, its average discount is 2.3%.
Meanwhile, the DTF Tax-Free Income fund, which terminates in 2028, last month eliminated its leverage and is trading at a discount of 12.6%, or 87 cents on the dollar. As the fund moves closer to liquidation, the discount will disappear, said Ryan Paylor, a portfolio manager at Thomas J. Herzfeld Advisors, which focuses on the closed-end fund market.
Bloomberg Markets
By Martin Z Braun
August 18, 2023