Leveraged Muni Funds Face Losses as Bond Rout Drags On

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The worst bond rout in decades has meant double-digit losses for leveraged municipal bond funds.

Facing rock-bottom yields over the past 10 years, high net worth households seeking tax-free income turned to closed-end muni mutual funds, which according to Morningstar Direct hold about $60 billion in total. Closed-end funds issue shares as public companies do, with investors being able to trade among themselves. But investors can’t add money to funds or redeem shares for cash, as they can with more-common open-end mutual funds.

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