Core Viewpoint - The closed-end fund (CEF) market is experiencing mixed performance, with discounts generally widening, but most sectors showing positive returns month-to-date, particularly municipal funds due to a significant drop in long-term Treasury yields [15]. Market Action - Fixed-income sector discounts are trading tighter than equity counterparts, indicating a shift in investor preference towards fixed-income assets [4]. - The credit CEF swirlogram suggests that valuations are inching towards the unattractive quadrant, with tight underlying credit spreads and increasing discounts [7]. - The funds have seen a bounce of 4-5% as discounts tightened, with historical data showing that certain funds traded at significant discounts which have mostly disappeared at the start of 2024 [8]. Sector Discounts - Loan CEFs are trading at very tight discounts, while municipal CEF discounts have tightened slightly but remain near double-digit levels on average [18]. - Limited duration CEF discounts have also tightened slightly, indicating a disconnect from loan CEFs, which have historically moved in sync [18]. Investment Vehicles - Investors interested in Saba's activism have three investment vehicles available: the SABA CEF ETF (CEFS) and two CEFs (BRW and SABA) [10]. - The SABA CEF ETF is characterized as a more pure-play activist CEF portfolio, while the two CEFs resemble traditional fixed-income/multi-sector funds [12]. Recent Developments - Saba and Invesco have entered into a standstill agreement regarding two state municipal CEFs (VPV and VTN), with Invesco planning a tender offer for 25% of the funds' common shares at 99% of NAV, set to go live at the end of October [21]. - Following the tender offer, it will be observed whether Saba will increase its share purchases if discounts widen again [22].
CEF Weekly Review: Saba And Invesco Call Truce (For Now)