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iShares National AMT-Free Muni Bond Message Board

  • metalsguru metalsguru Jan 26, 2012 11:04 AM Flag

    Time to short MUB

    As of right now this is at a 3% premium to its true value. THAT IS EQUIVALENT TO A FULL YEAR OF MUNI RETURNS! First I switched into TFI (PZA also looks good) but now it's probably time to short MUB as well. Only a matter of time until some big holder either switches to an ETF or has new shares created and dumps them on the market. You were forewarned...there are plenty of other liquid ways to get muni exposure without paying up.

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    • good call. Just came accross the MUB chart tonight. What do you think about UUP?

    • mullalarmbereitschaft mullalarmbereitschaft Feb 22, 2012 11:15 AM Flag

      We Love This ETF: Sell It Now
      The largest muni-bond ETF is trading at an exploitable premium.
      PrintCommentRecommend (2)
      By Timothy Strauts | 02-22-12 | 06:00 AM | E-mail Article
      Something strange appears to be going on with municipal-bond exchange-traded funds. The two largest ETFs in the category have had very different performances for the year to date. IShares S&P National AMT-Free Municipal Bond (MUB) has returned 4.90% this year. Its main competitor, SPDR Nuveen Barclays Capital Municipal Bond (TFI), has returned only 2.19%. Both ETFs track investment-grade municipal bonds, have similar yields and durations, and have fees that are within 2 basis points. From a holdings perspective, the only material difference is the slightly higher credit quality of TFI, but even that difference is negligible.
      I am an advocate for well-constructed funds, so it pains me to say this:

      It's time to part ways with MUB.

      This recommendation has nothing to do with our outlook for the muni-bond market. It just boils down to returns.

      MUB has been trading at a Substantial Premium to its net asset value lately, a phenomenon more frequent in closed-end funds than in the ETF marketplace.

      However, TFI is still consistently trading near its NAV. So, if the fund characteristics are so similar yet one is trading at fair value and the other is trading at a 3% to 4% premium, why wouldn't you swap them? The premium is almost double the current SEC yield of approximately 2%.

    • You make a good point, I noticed the 3% premium. But I don't short stocks, and I don't want to incur the capital gains. So I guess I will sell a little more MUB (I sold at 110 the first time). Lighten up when it's up, buy in little by little when it's down, that's my simple but effective investment strategy.

    • Losing again,huh?Who are you,Meredith Whitney?

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