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Spicing up muni yields; Live long and prosper; Correction

Spicing up muni yields

With municipal bond yields “at unprecedented low levels,” many income-oriented investors have turned to taxable debt and dividend-paying stocks, said Katy Burne in The Wall Street Journal. Now JPMorgan Chase has concocted a “spicy cocktail” to lure them back: the Tax Aware Income Opportunities Fund. The bulk of the fund’s $25 million portfolio consists of conventional municipal bonds. The spice comes from the derivatives and ultra-short-term instruments that the fund’s managers use to boost returns. The fund generates additional income by selling credit default swaps—default insurance—on municipal-bond indexes and corporate debt. The aim is “to provide enough cushioning to withstand inflation and interest-rate increases.”

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