Wondering if anyone has experience trading closed end bond ETF's? Any insight into the basics that drives the premium/discount relative to the NAV? I "passively acquired" a few of these, and searching have not found much ...
If there is a sentiment in the market that the manager of the fund is providing no value by actively managing the portfolio, the fund should be trading at the discount of [duration x management fee] i.e. 1% management fee x duration of 5 = 5% discount. If the market is bearish on the portfolio assets, then you can further add 5-10% discount, depending on the expected yield change. Some of those closed end funds trading at discount look enticing at first but some of those are really poorly managed and in fact the market is discounting future yield decrease. Some sponsors like Blackrock have good managing reputation and their funds trade near the fair value whereas Merrill Lynch funds had been quite unpolular and traded at deep discounts (now that they merged,(like HYT) the gap between ML funds' NAV and MV seems to be narrowing a bit).
Thanks coach! Great thread you referenced, more than I had hoped to find. I sincerely appreciate your time to bring it to my attention.