Will rising interest rates hurt my leveraged closed end funds?
I have several closed end funds that use leverage. They've provided a nice monthly income. Will rising interest rates endanger these funds?
It's hard to answer this question without knowing the underlying strategy of each of your CEFs. Some assets do well in rising interest environment, others do poorly. Also, it depends if your CEFs are using short-term or long-term leverage financing. In any case, you can expect some increase in borrowing costs.
Leveraged closed end bond funds are a great income vehicle if used correctly. Be advised, like any bond, product values will likely be hurt in a rising rate environment. One important factor about many of these funds is actually the shape/slope of the yield curve, not just the general level of rates. These funds use their leverage by borrowing in the short end and investing longer, as long as the slope of the yield curve remains positive (does not flatten or invert), the leverage should. I generally view these funds with the time line of buying a bond with the average duration of the fund, and reassess periodically.