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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Re: income CEFs article Date: 4/6/2014 1:45 PM
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Many closed end bond funds are leverage funds. That is they borrow against their bond portfolio at short term interest rates to buy more bonds. As long as the yield curve is not flat or inverted this gives them extra income on the spread between long and short term interest rates.

I have owned two tax free bond funds that do this. Nuveen's NQS and Blackrock's BLE.

Some are nervous about this extra income but I find the risk is not high. When the spread becomes unprofitable they merely close out positions and trim their monthly dividend by a penny or two. The fund itself is not at risk. These are well managed funds in a fluid market. Its not like 30 yr mortgages.

Just FYI. Do note if they are leveraged funds or not.
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