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Problems for Municipal Bond CEFs: Nuveen and BlackRock Losing Share

Posted May 25th, 2007 by Michael J Bomma...

    One of the trends I've noticed this week is that, despite the fact that municipal bond yields closed at or above last week's close, the municipal closed-end funds have been amongst the week's worst performers. 

    Out of the worst 70 performers on the week as of Thursday's close, 20 were municipal bond ETFs.  Here they are.

Symbol Day Week Month YTD Day $ Week $ Month $ Day / Avg. Week $ MA 20 Price MA 20 Vol Week SPY Corr
BKN -1.51% -10.80% -10.23% -8.97% 7 17 21 229.06% -9.93% 594.06% 37.39%
BFK -0.62% -9.93% -13.43% -7.39% 12 34 52 214.23% -10.97% 423.34% 30.33%
BSD -5.68% -9.45% -8.26% -4.33% 3 4 6 416.57% -8.64% 962.37% 56.58%
BWC -1.98% -5.08% -3.00% -0.71% 4 16 43 151.10% -3.68% 102.77% 24.35%
NXC -0.28% -4.60% -1.47% 0.50% 0 1 3 65.03% -2.61% -15.81% 19.67%
APX -1.69% -4.20% -3.85% -0.38% 0 3 8 89.47% -3.95% 22.78% 39.43%
NXE -0.07% -4.09% -0.97% 4.38% 0 0 1 82.24% -1.29% 11.83% -18.19%
FMN 0.33% -4.05% -3.19% 0.80% 0 1 4 163.00% -3.58% 135.21% -9.03%
BKK -2.41% -3.75% -1.66% -0.39% 1 3 8 237.11% -2.77% 253.90% 53.95%
PCK -1.06% -3.58% -4.80% -1.06% 1 5 19 159.80% -3.92% 52.72% 28.15%
BFZ -1.27% -3.54% -7.79% -1.80% 1 5 16 102.11% -5.38% 26.19% 17.42%
BQH -1.63% -3.54% -1.74% -2.78% 0 0 2 128.07% -2.73% -25.42% 54.72%
NUJ -0.82% -3.48% -3.12% 0.76% 0 1 2 208.89% -2.71% 288.59% 27.76%
EIP 0.07% -3.32% -2.11% 3.92% 0 1 1 103.49% -2.73% 49.06% 29.27%
MUJ -1.13% -3.18% -2.36% 1.09% 1 2 5 193.17% -2.84% 115.93% 39.71%
BHV -0.27% -3.04% -6.23% -5.80% 0 0 0 158.25% -5.01% 177.53% 38.62%
NXJ -1.85% -3.00% -4.37% -3.63% 0 0 2 154.92% -3.46% 70.21% 59.40%
NOM -2.56% -2.96% 0.00% -2.03% 0 0 1 188.61% -2.39% 222.09% 67.86%

    I'm not sure whether this is related to gambles on the yield switch, but with 93 million dollars traded on the week far above average dollar liquidity, it seems as if there is definite exiting going on.  Funds like BKN and BFK are easily breaking volume records for at least the past 3 years.

    All in all, for BlackRock and Nuveen, this does not look to be good news.  Whether someone has caught wind of a competing ETF or whether this is purely a move on the yield, it's something to keep an eye on.