{"id":14475,"date":"2023-09-20T17:16:27","date_gmt":"2023-09-20T17:16:27","guid":{"rendered":"https:\/\/prosfunds.com\/news\/pml-the-macro-environment-keeps-pressuring-this-option-nysepml\/"},"modified":"2023-09-20T17:16:29","modified_gmt":"2023-09-20T17:16:29","slug":"pml-the-macro-environment-keeps-pressuring-this-option-nysepml","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=14475","title":{"rendered":"PML: The Macro-Environment Keeps Pressuring This Option (NYSE:PML)"},"content":{"rendered":"
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Main Thesis & Background<\/h2>\n

The purpose of this article is to evaluate the PIMCO Municipal Income Fund II (NYSE:PML<\/span>) as an investment option at its current market price. This fund’s objective is to invest at least 90% of its net assets in municipal bonds whose interest is exempt from regular federal income taxes and the fund invests at least 80% of its net assets in bonds that at the time of investment are investment grade quality – bonds that are unrated but of similar quality.<\/span><\/p>\n

Back in Q1, I took a look at all the leveraged PIMCO national muni CEFs and saw limited value. The inverted yield curve and weak income metrics were macro-headwinds – despite a generally bullish outlook for munis overall. This led me to suggest caution with respect to PML (and other funds) and that cautionary message has certainly been vindicated over the last seven months:<\/span><\/p>\n

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Fund Performance (Seeking Alpha)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

In fairness, I probably should have been more bearish, but I don’t like the idea of outright selling income-oriented vehicles unless there is a very strong and compelling reason. I saw a few positives for PML, so the steepness of this loss has surprised even myself.<\/p>\n

With this sharp drop over time, I thought it could be worthwhile to take another look at this CEF. Unfortunately, after review, I can’t walk away with a buy case despite what appears to be some underlying value. Therefore, I am maintaining the “hold” rating for PML – and I will explain why in detail below.<\/p>\n

What Are The Good Points? Discount To NAV Has Emerged<\/h2>\n

To begin, I am going to touch on a couple of positives. This is important because I had initially considered a “sell” rating on this security, but there are a few attributes that make me reluctant to do so. The first aspect in particular is the fund’s valuation. Back in February, when I last suggested my followers avoid this fund, PML sat with a 4% premium. Today – it has a discount to NAV in excess of 2%:<\/p>\n

<\/span><\/p>\n\n\n\n\n\n
Fund<\/td>\nCurrent Valuation<\/td>\n<\/tr>\n
PML<\/td>\n(2.4%)<\/td>\n<\/tr>\n
PIMCO Municipal Income Fund (PMF)<\/td>\n(2.4%)<\/td>\n<\/tr>\n
PIMCO Municipal Income Fund III (PMX)<\/td>\n(9.1%)<\/td>\n<\/tr>\n<\/table>\n

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