Note that NQS is a tax free bond fund. Hence, those monthly payments are free of federal taxes. Occasional capital gains distributions do happen, but they are taxable."So why should the monthly dividends made by the fund suffer (unless the fund manager is regularly selling those securities at a loss)?"The monthly interest paid by the fund is determined by the earnings on its portfolio. That tends to be stable over the long term, but does vary somewhat from time to time. I presume the major factor is that bonds paying a good yield mature and must be replaced by new ones that pay a market yield. Trading income may also be a factor."Also, the total return for NQS in 2004 was "market return 5.96%, NAV return 7.14%". Does this mean a total return of 13%?"Note that the share price reported for a closed end fund is not its NAV. Its share price is determined by market forces and may be at a premium or a discount from its NAV. Hence, the tax free return for NQS can be as high as 7% is you buy it right, but no it is not 13%.In your comments on NQS pricing, I think you are seeing a conflict between the Feds raising interest rates and yield investors (who have seen many of their highest yield vehicles called or mature) bidding up what high yield investments are left. Hence, rising interest rates drive down prices, but market forces bid them back up. Its this conflict that makes bonds confusing right now. In the end, interest rates have to win, but investors are still hungry for higher yields.
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