MTS: Attractive Bond Fund for Income Investors

Montgomery Street Income Securities (ticker:MTS) is a closed-end bond fund that appears to a be a reasonable value now for conservative income-oriented investors. It invests in a diversified bond portfolio across the spectrum- about 50% in US Governments and Agencies, about 40% in corporates and the remainder in mortgage bonds.

In the next rebalancing (March 21), MTS Is being added to the CEFX closed-end fund index that is used by the PCEF exchange-traded fund.

Here are some recent stats on MTS:

Ticker:MTS    Montgomery Street Income Securities

  • Total Net Assets= 173 MM
  • Expense ratio= 0.77%              Discount to NAV= -8.4%
  • Distribution rate: 4.34% (quarterly dividends)
  • Modest Leverage: 9.64%
  • Turnover Ratio: 87% (annualized)

Full Disclosure: Long MTS.

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5 responses to “MTS: Attractive Bond Fund for Income Investors

  1. Are the bonds in the closed ended fund short, intermediate or long bonds. If its short, which usually provides higher income, it could be more susceptible to changes in interest rates, which in turn causes more volatility with the fund. I am just curious.

  2. The average duration is 4.15 years. The fund is not very volatile. A 1 percent move in benchmark interest rates would move the price +/- 4%.

    By the way, the steep yield curve today is such that longer term bonds provide higher interest than short term bonds but with much more risk. I like the fact the the duration of MTS is fairly low, so it is somewhat insulated from higher interest rates.

  3. What is the current yield?

    How long would it take for breakeven a 1% swing in rates?

  4. Any thoughts on the First Trust Strategic High Income Fund – FHO?

  5. Pingback: Montgomery Street Income (MTS) is now a PIMCO Fund « Quant Investor’s Blog

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