Heard on the street: Risk-takers believe leveraged muni funds may provide quick score if interest rates fall
NEW YORK -- Just suppose the bond market rallied.</br></br>After a year of falling bond prices, few people are willing to make that bet. But if you are, analysts say, there's one investment you really ought to consider: leveraged municipal bond funds.</br></br>"If you want to make an aggressive bet on lower interest rates, those funds are the way to go," says Catherine Gillis, editor of Morningstar Closed-End Funds, a Chicago newsletter. "This is a trading play. This isn't for your mild-mannered municipal bond investor."</br></br>Not at all. Most people hold their muni investments for years. But anyone achieving a short-term profit in leveraged muni funds might be well advised to grab it and run.</br></br>To buy these high-octane investments, you have to enter an arcane corner of the stock market occupied by closed-end funds. A closed-end fund has a fixed number of shares outstanding, traded on an exchange. The shares often trade for less than the per-share value of the fund's portfolio, so you can effectively buy $1 of fund assets for just 90 or 95 cents.