Evaluating Nuveen AMT-Free Quality Municipal Income Fund as an investment at its current market price, focusing on tax-exempt municipal securities. Previously rated as a buy in mid-2024 due to income boost and discount to NAV, which proved to be accurate. I am now shifting to a more cautious stance. This is primarily due to a shrinking of the discount and a large reliance on ROC for the fund's distribution.
The fund saw another income boost to start the month of June. The muni yield curve is upward sloping, providing a distinct advantage over similarly dated treasury bonds. NEA still has a large discount to NAV, which could entice value-oriented buyers.
NUW: Tax-Free AMT-Free Income While Waiting For Upside
The Nuveen AMT-Free Quality Municipal Income Fund has experienced a Q4 rally and a boost in income, leading to gains for investors. However, the fund's income boost may not be sustainable, so investors should weigh this carefully if they plan to hold beyond the short-term. Lower inflation is a positive for bonds, including munis. This is because the Fed is unlikely to raise its benchmark rate further.
Municipal Bond CEFs have historically wide gaps between price and NAV due to investor dislike of rate increases. Once the FOMC stops, these funds should recover. The NEA CEF is reviewed in detail as the start of a due diligence process investors are encouraged to complete. The NEF CEF is recommended for long-term investors, despite potential rate hikes. Delayed entry or use a swap trade with a similar fund an investor owns at a loss.
The article evaluates the Nuveen AMT-Free Quality Municipal Income Fund as an investment option at its current market price. NEA is a multi-state, closed-end fund aiming to provide current income exempt from regular federal income tax and the alternative minimum tax. Despite its tax-free objective, the fund has performed poorly, losing double digits since July 2022.