The BlackRock Taxable Municipal Bond Trust (BBN) aims for high current income and capital appreciation through taxable municipal bonds. I previously favored tax-exempt munis over BBN, but my outlook on this is shifting heading into 2025. BBN's discount to NAV has widened to above 7% since March, making it slightly cheaper despite modest positive returns.
BlackRock Taxable Municipal Bond Trust has not performed as well as expected, with returns not keeping up with cash. The high amount of leverage in BBN and lack of progress in inflation make a cautious "hold" rating more appropriate. The expected increase in new muni issuance and struggles in the commercial real estate market pose risks for the municipal bond market.
For the second consecutive month, both equity (+3.42% on a NAV basis) and fixed income (+3.14%) CEFs on average posted plus-side returns. At month end, 9% of all CEFs traded at a premium to their NAV, with 9% of equity CEFs and 8% of fixed income CEFs trading in premium territory. Developed Markets CEFs (+6.45%), for the second straight month, outpaced the other classifications in the equity CEF universe for December.
The BlackRock Taxable Municipal Bond Trust is a closed-end fund that invests in taxable municipal debt, offering income-seeking investors a different option to corporates. The BBN CEF's yield of 7.18% is lower than most fixed-income closed-end funds, but it offers the advantage of investing in municipal debt, which is generally considered less likely to default. The fund's recent performance has been impressive, outperforming the Bloomberg U.S. Aggregate Bond Index on a total return basis, but its use of leverage makes it more volatile.
BlackRock Taxable Municipal Bond Trust has registered losses and the leverage headwind has not evened out. Higher short-term rates on highly leveraged funds remain a stubborn headwind, making a "buy" case difficult. The discount on BBN has widened to almost 8%, making it look cheap compared to its historical premium or small discount.
The high rate of inflation in the U.S. is causing the cost of living to rise significantly, putting financial strain on American consumers. Investors can consider purchasing shares of closed-end funds specializing in income generation to combat the rising costs. The BlackRock Taxable Municipal Bond Trust is one such CEF that offers a 7.05% yield and invests in municipal bonds, appealing to risk-averse investors.