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CEF Specialist

Nearing the End of a Decent Year in CEFs

Falling oil prices buffet some CEFs, but many have turned out strong returns so far this year.

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Oil prices continued to slide in November, partly because of OPEC’s late-November decision not to limit its oil production. The decline in oil has affected high-yield bond closed-end funds alongside energy, MLP, and related CEFs. The percentage of energy companies in the junk-bond market has increased over the past few years as the shale boom in the United States significantly increased that sector’s need for capital. Energy firms make up more than 15% of the Barclay’s U.S. Corporate High Yield Bond Index today, compared with just 6% in 2007.

During November, the Federal Reserve kept interest rates steady but noted concerns over global growth. Some interpreted this as a signal that the Fed may delay its plan to hike rates next year should the global economic picture remain dim. Disappointing Black Friday sales added to investors’ concerns, pushing the long end of the yield curve lower over the month.

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Cara Esser does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.