Despite a price drop after initial Fed rate cuts in September 2024, VVR is trading at a premium, which is historically high. This makes it an unattractive entry point. While defaults remain relatively low, there's an upward trend, and the asset class experienced outflows as investors rotated into fixed-rate bonds anticipating further rate cuts. The fund focuses on 1st lien-leveraged loans, a positive feature due to their higher claim on assets.
Invesco Senior Income Trust (VVR) offers a 13% yield through investments in senior loans, primarily below investment-grade, diversified across various industries. VVR's portfolio includes revolvers and term loans, collateralized and with high floating interest rates, making it sensitive to interest rate cycles. The fund has maintained relatively consistent dividends, even during economic downturns like COVID.
The Invesco Senior Income Trust offers a high yield of 11.83%, primarily investing in senior leveraged loans with floating interest rates, making it attractive for income-focused investors. The fund's share price has appreciated by 14.44% since October 2023, outperforming its underlying portfolio, which has declined by 1.96%, suggesting a potential overvaluation. The fund invests mostly in junk debt, and the credit quality of its portfolio appears to be falling.
Invesco Senior Income Trust is a successful fixed-income closed-end fund with an outstanding total return since last year. VVR holds mostly first lien loans and has a well-covered distribution standing at 88% on a fiscal year basis. The fund's premium to NAV is a concern, expected to decrease when the Fed starts cutting rates, impacting both distributions and premium.
The Federal Reserve raised interest rates in an attempt to combat rising inflation from 2021-2023. Uncertainty remains about the market's response to the next rate decision in March. The article reviews the performance and prospects of the Invesco Senior Income Trust floating rate closed-end fund in the current inflationary and interest rate environment.
Invesco Senior Income Trust offers a high level of income, with a whopping 13.65% yield, higher than most other funds in the market. The fund invests primarily in floating-rate debt securities, which remain stable in rising interest rate environments. The fund's leverage is reasonable and its distribution appears to be sustainable based on its net investment income.
The high inflation rate in the US is causing financial strain for Americans, leading to desperate measures such as dumpster diving and pawning possessions. Investors can combat the rising cost of living by investing in closed-end funds that specialize in generating income. The Invesco Senior Income Trust is one such fund that offers a current yield of 11.94% and has a stable performance track record.
Invesco Senior Income Trust has performed well in 2023, with a flat NAV and a high dividend yield. VVR is currently paying a 12% yield, which is fully covered and is expected to be supported in 2023 as rates remain higher for longer. The fund's discount to net asset value has been extremely volatile in 2023, mainly driven by market expectations around a Fed pivot.