Debt-Focused Equity Plays Slip Amid Weak Treasury Auction (DSM, BLE, PHT, PHK, NPP, VCV, EIM, PST, TBT)
Despite a successful auction of two-year notes yesterday, investors are once again dumping Treasuries today after soft demand on a $35 billion sale in five-year notes pushed yields higher in the space.
As a whole, the Debt Focused Closed End Funds Index is slipping fractionally today, but has underperformed the S&P by -11% since late November. Funds that invest in municipal debt like the Dreyfus Strategic Municipal Bond Fund (DSM) and the Blackrock Municipalome Trust Ii (BLE) are leading today’s decline and have sunk by nearly -7% over the past month despite yielding 8% based on historical distributions. Meanwhile, high-yield or “junk” plays like the Pioneer Highome Trust (PHT) and the Pimco High Income Fund (PHK) are sinking by -1%, but sport annual yields of 10% and 11% respectively. Still, the Nuveen Performance Plus Municipal Fund (NPP), the Invesco Van Kampen California Value Muni Income Trust (VCV) and the Eaton Vance Insured Municipal Bond Fund (EIM) take the title as the sector’s biggest monthly losers as all three funds plunged -11% or more for the period.
Elsewhere, the Bond ETFs Index is lower by -0.5% today and has dipped by -2% for the month. Only a handful of the 49-component Index is trading in positive territory today including “reverse ETFs” like the ProShares UltraShort 7-10 Year Treasury (PST) and the ProShares UltraShort 20+ Year Treasury (TBT).
It will be interesting to see how these sectors fare going forward and where yields go from here. For a broader view of these and other high-yielding segments in the overall market, investors can track the top-25 tickerspy Indexes ranked by yield for performance trends and a suite of other metrics at tickerspy.com.
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