BlackRock Income Trust (BKT) Stock

BlackRock Income Trust is a leveraged fixed income CEF focused on Agency MBS, set to benefit from lower rates as part of a monetary easing cycle. BKT is merging with BlackRock Enhanced Government Fund, thus increasing its AUM; EGF shareholders must approve the corporate action, but approval is likely. Despite high ROC utilization, BKT remains attractive due to the favorable macro rates outlook, positioning it as a solid long-term hold.

BKT has delivered a 9% total return, outperforming the S&P 500, but the current pricing is no longer appealing, prompting a downgrade to 'Hold'. Significant rate narrowing has benefited BKT due to its high sensitivity to rates, but the fund's effective duration has now decreased to 7.3 years. BKT remains a leveraged proxy for mortgage REITs with high correlation to names like NLY and AGNC, but lacks active duration management.

I evaluate the BlackRock Income Trust as an investment option and explain why I am no longer bearish on the fund. I previously had a sell rating on the fund due to limited opportunities, and but now I believe hold is the appropriate rating going forward, despite some macro-concerns I have. The fund had benefited from strong demand from the Fed and large US banks, both of whom have been scaling back their purchases of agency MBS.

BlackRock Income Trust is a closed-end fund that purchases agency MBS bonds and leverages them to generate high dividends and a rates-based return profile. The fund's 9% distribution yield is not supported by underlying cash flows, but it should make up for it through capital gains as rates move lower. BKT has a total return profile closely correlated to mortgage REITs like Annaly Capital and AGNC Investment Corp, making it an attractive option in the current macro environment.

Markets were flat, but upcoming events like the jobs report, PMIs, and ECB meeting are important.

The BlackRock Income Trust offers a high yield of 8.80%, making it an attractive option for income-seeking investors. The fund invests in AA-rated mortgage-backed securities, providing a reasonable yield for investors looking for guaranteed government-backed securities. While the fund has seen recent gains, there is a risk of share price declines due to the powerful run-up in bonds, and investors may want to take some gains and reduce their risks.

BKT is a leveraged MBS CEF. The fund's distributions are mostly return of capital, with low net investment income and coverage ratios. BKT has few benefits or positives.

BlackRock Income Trust offers investors access to high-quality agency-backed mortgages, providing impressive returns with fewer fluctuations and risks than mortgage REITs. BKT has a long track record and has outperformed passive MBS indices, offering higher Sortino and Sharpe ratios. The fund's active management strategy allows it to hedge against rate changes and capitalize on new mortgage issuances, providing potential for consistent returns, utilizing institutional tools like swaptions.

The article evaluates BlackRock Income Trust (BKT) as an investment option at its current market price. BKT has not performed well since the last review in 2022, leading to a less-than-bullish rating. The fund's extensive use of leverage and lack of diversification pose a heightened risk environment, making it advisable to avoid.