Municipal Bond Unit Investment Trust

Date:

How Can I Review And Compare Uits

Munis a Great Spot to Invest Now, Vanguard’s Malloy Says

If youre considering a UIT as an investment, we encourage you to contact a financial advisor to help you get started. Our financial advisors will work with you to determine whats important to you now and for the future. UITs offer different investment objectives and portfolios. Together we will review your options and design a personalized investment strategy based on your investment goals.

Mutual Funds Vs Unit Investment Trusts

UITS are similar to mutual funds in that they both consist of collective investments in which many investors combine their funds to be managed by a portfolio manager.

UITs are bought and sold directly from the company that issues them, although sometimes they can be bought on the secondary market. This makes them similar to open-ended mutual funds. UITs are also issued via an initial public offering , which makes them like closed-end mutual funds.

An important difference between UITs and mutual funds is that UITs aren’t actively-traded. Securities in a UIT aren’t bought or sold unless there’s a change in the underlying investment, such as a corporate merger or bankruptcy. Investments in a mutual investment trust are held until maturity, and some even have a maturity date.

Typically, the management fees of a municipal investment trust are lower than the management fees of a mutual fund, partly because there is not as much active management involved.

Mutual investment trusts are available through brokers and usually have a sales charge and a minimum investment requirement. However, municipal investment trusts do not charge a commission to execute a sell order.

How Are Uits Taxed

Its important to understand the tax considerations of UITs. The termination of a trust is a taxable event, regardless of whether the proceeds are rolled over into a new trust. Interest and dividend payments, returns of principal and termination of UITs are the most common taxable events to consider. Review the prospectus and consult with a tax professional to understand your personal situation.

Your UIT fees and expenses may include:

  • Annual administrative expenses

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What Is A Municipal Bond

Municipal bonds are debt instruments issued by states or municipalities that allow them to borrow money for a specific purpose.

The funds raised by a bond sale might be used to build roads or improve infrastructure, build schools or to support beneficial community projects like hospitals or health centers.

Municipal bond defaults are possible but extremely rare. A bond default occurs when the bond issuer fails to make a payment toward interest or principal within a specified period.

U.S. Treasury bonds are generally regarded to be the safest type of bond investment but generally dont provide the same rate of return as municipal bonds and dont have the same tax advantages found with municipal bonds.

Check out our guide on how to buy municipal bonds.

How Does Gbab Seek To Reduce The Portfolio’s Effective Duration

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Through a proprietary duration management trading strategy, the Trust will utilize a two-pronged approach that seeks to reduce the portfolios effective duration to generally less than 15 years.

Interest-Rate Swaps. GPIM will initially seek to take advantage of the relatively flat portions of the U.S. Treasury yield curve that appear to offer favorable decreases in duration without significant yield concessions. For example, this may be accomplished by combining the sale of interest-rate swaps on the long end of the yield curve with the purchase of interest-rate swaps on the intermediate portion of the yield curve. To take advantage of cost anomalies, GPIM will have the flexibility to opportunistically manage duration and may trade across other yield curves that exhibit similarly wide duration spreads with low spreads in yields.

Fixed-Income Sector and Security Selection. The Trust may invest in short-duration fixed-income securities, which may help to decrease the overall duration of the Trusts portfolio while also potentially adding incremental yield.

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Best States For Muni Bonds

Texas isnt just for sunshine and armadillos, its also a great place to buy muni bonds. Texas residents dont pay a state income tax, so theres no tax advantage at the state level for Texas bond investors, but the state has a AAA rating and a booming economy to help fill state coffers with sales tax revenue.

Yields for Texas General Obligation bonds are strong right now, often higher than the AAA-index, providing a prudent bond investment choice with an impressive return.Many municipalities within Texas are also highly rated with attractive yields for low-risk investments.

Bond investors should have no trouble finding muni bonds in Texas with ratings of BBB and higher and with coupon rates as high as 5% or more.

With its AA+ rating, Washington State is a safe bet for bond buyers. The state has reserves put aside for the proverbial rainy day, of which it has many, helping assure investors that its financial obligations will be met.

We found a number of bonds for the state and for municipalities and projects within Washington that merit a closer look. Coupon rates ranged as high as nearly 10%.

However, investors should invest time in learning more about each bond, particularly if the bond is revenue-based, which makes payments from revenue generated from the project.

The Empire State just might be the perfect place to start building your bond investment empire. New York has a hard-won AA+ rating, proving the state places priority on its credit commitments.

What Is A Uit

A unit investment trust is a professionally selected pooled investment vehicle in which a portfolio of securities is selected by the sponsor and deposited into the trust for a specified period of time. Generally, a UITs portfolio is not actively traded and follows a buy and hold strategy. A unit investment trust is registered with the SEC as a Registered Investment Company or Grantor trust. The portfolio remains fixed until the termination of the trust, usually ranging from 13 months to as much as 30 years, depending on the underlying securities. Although the securities within the trust remain generally fixed and are not managed, the sponsor may remove a security from the trust under limited circumstances. These situations are outlined in the prospectus.

Raymond James wants to ensure that you are investing in the products that best suit your financial situation, investment objectives, risk tolerance, time horizon, diversification and liquidity needs. This guide will help you better understand the features, costs and risks associated with unit investment trusts .

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Allen Li Cfa Portfolio Manager

Mr. Li joined Guggenheim in 2007 with a dual role in equities and investment grade corporate research. He began covering municipal bonds when Guggenheim built up sector exposure to take advantage of the auction-rate securities market dislocation in early 2008. He manages Guggenheims dedicated municipal portfolios in addition to overseeing multi-strategy accounts exposure to the sector. Mr. Li received a B.A. in Economics from Cornell University. He has earned the right to use the Chartered Financial Analyst® designation and is a member of the CFA Institute.

Letter Ruling Letter Ruling 79

What are Municipal Bonds? | Fidelity
Date:

May 22, 1979

Dear Sir:

Your letter of April 26, 1979 requests certain rulings with respect to the taxation of ********** Municipal Bond Trust ********** .

The Trust is to be created by an agreement between as sponsor and Trust Company as Trustee.

The Sponsor is a Delaware corporation having its principal office in New York City and a sales office in Boston. Sponsor is registered to do business in the Commonwealth as a foreign corporation. The Trustee is a New York corporation with its principal place of business in New York City. The Trust Agreement will be executed and delivered in New York and by its terms is to be governed by New York law. All the business of the Trust will be conducted in New York, its assets will be located in New York, and its distributions to certificateholders will be made from New York. The Trust will have no office in Massachusetts.

Based on the foregoing, it is ruled:

1. For Massachusetts income tax purposes, the Massachusetts Trust 1 will be treated as a corporate trust under Section 8 of Chapter 62 of the Massachusetts General Laws and not as a grantor trust under Section 10 of chapter 62 of the General Laws.

5. Gains and losses realized upon sale or redemption of Units by Certificateholders who are subject to Massachusetts income taxation under General Laws Chapter 62 will be includable in their Massachusetts gross incomes.

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Why A Leveraged Fund

Leveraged closed-end funds offer investors the opportunity to purchase shares of a fund whose dividend yields generally are designed to be higher than those of similar, unleveraged investments. At the same time, leverage introduces or heightens certain investment risks. As a result, understanding leverage, its benefits and risks, plays an important role in determining whether a leveraged Fund is the right investment. Leverage creates risks that may adversely affect the return for the holders of common shares, including: the likelihood of greater volatility of NAV and market price of the Funds common shares, fluctuations in the dividend rates, and possible increased operating costs, which may reduce the Funds total return.

Invest In Municipal Bonds Now

Not every bond is a great buy. Many of the bonds with the highest yields offer such high returns because the risk is greater.

Consider bonds as a part of a well-diversified portfolio. Start with our recommendations to find the best bonds and online broker today.

Want to learn more about investing? Check out Benzinga’s guides to the best online brokerages, how to trade stocks for free and how to buy corporate bonds.

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Steven H Brown Cfa Chief Investment Officer Total Return And Macro Strategies

Mr. Brown joined Guggenheim in 2010 and is a Portfolio Manager for Guggenheims Active Fixed Income and Total Return Mandates. Mr. Brown works with the Fixed Income Chief Investment Officer and other members of the Portfolio Management team to develop and execute portfolio strategy. Additionally he works closely with the sector teams and Portfolio Construction group. Prior to joining the Portfolio Management team in 2012, Mr. Brown worked in the asset backed securities group. His responsibilities on that team included trading and evaluating investment opportunities and monitoring credit performance. Prior to joining Guggenheim, Mr. Brown held roles within structured products at ABN AMRO and Bank of America in Chicago and London. Mr. Brown earned a BS in Finance from Indiana University’s Kelley School of Business. He has earned the right to use the Chartered Financial Analyst® designation and is a member of the CFA institute.

What To Look For In Municipal Bonds

How Much Do Tax Free Municipal Bonds Pay

BBB rating or higher. Default rates for bonds rated BBB are slightly over 1%, with bonds rated A, AA or AAA, boasting a default rate well below 1%.

Higher risk bonds, even as part of a diversified portfolio, can destroy the overall bond portfolio yield if any of the bonds default. Moody and S& P use a slightly different convention for the rating, but both lead the rating name with letters A, B, C, etc.

Taxable equivalent yield. Compare yields for municipal bonds to their taxable equivalents for bonds with similar ratings. In many cases, youll find that the taxable equivalent yield of municipal bonds will make munis a more attractive choice.

General obligation bonds. They are effectively secured by the taxing authority of the issuer. This means that the state or municipality can raise taxes to meet its financial obligations, including bond payments.

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What Is The Drip And How Is Its Price Determined

DRIP is the Dividend Reinvestment Plan. The DRIP price is the cost per share for all participants in the reinvestment plan. The DRIP price is determined by one of two scenarios. One, if the Common Shares are trading at a discount, the DRIP price is the weighted average cost to purchase the Common Shares from the NYSE or elsewhere. Lastly, if the Common Shares are trading at a premium, the DRIP price is the determined either the higher of the NAV or approximately 95% of the Common Share price.

How Do Bond Uits Work

There are three main features of bond UITs that can provide you with a better understanding of how these fixed-income investments work.

Income payments Fixed-income UITs typically pay you a monthly income, which can be fairly predictable, because the bonds in the trust do not frequently change. When bonds mature or are called, this will result in a return of principal and a decrease in income. The remaining bonds in the trust will continue to generate income over time.

Termination date A fixed-income UIT has a finite life and will return a portion of its principal as the bonds in the trust are called or mature. This is different from bond mutual funds and ETFs, which generally reinvest principal into the fund.

Defined par value The par value is the amount of principal that investors can likely expect to be returned over the remaining life of the trust. Fixed-income UITs have a defined par value based on the bond holdings in the trust.

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Best Municipal Bonds Methodology

Heres the bad news but its not all bad. The best municipal bonds are usually sold quickly to brokers, funds, banks or institutional investors. This leaves the retail investor grasping at empty space where the bonds once were or digging around for odd lots.

Nevertheless, we used the following information to choose the best of the best:

We also took reserves into consideration, which can provide insight into how well a state can navigate the next recession. States with some extra money in the bank may be more likely to meet their debt obligations without missing a beat.

What Is Uit Maturity

Municipal bonds face challenging time ahead, strategist says

Most UITs have an end date or maturity date. This maturity date marks the end of the UIT, which is then terminated.

If you hold your UIT until this date, you have the option to:

  • Sit and wait. Once the UIT matures, it will dissolve the portfolio and return any remaining principal to the investors.
  • Roll over your investment. You may roll the value of the cash payout into a new series of the same UIT or another UIT. You will still be responsible for paying taxes on any capital gains.
  • Do an in-kind distribution. If you want to continue with the same investment even after a trust terminates, you may, under certain circumstances, be able to request that the UIT sponsor pay out your portion of the trust in the form of stock in the underlying investments.

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Risks And Other Considerations

Please see the Trust prospectus for more complete risk information.

Unit Investment Trusts are fixed, not actively managed and should be considered as part of a long-term strategy. Investors should consider their ability to invest in successive portfolios, if available, at the applicable sales charge. UITs are subject to annual fund operating expenses in addition to the sales charge. Investors should consult an attorney or tax advisor regarding tax consequences associated with an investment from one series to the next, if available, and with the purchase or sale of units. Guggenheim Funds Distributors, LLC does not offer tax advice.

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date: 21 January 2023

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Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust

Current Distribution Rate 1, 2 8.76%
52 Week High/Low Market Price $21.90/$14.91
Guggenheim Funds Investment Advisors, LLC
Investment Sub-Advisers Guggenheim Partners Investment Management, LLCGuggenheim Partners Advisors, LLC*
1940 Act Asset Coverage Ratio 382.91%
5.47%

* Guggenheim Partners Advisors, LLC became an investment sub-adviser effective April 29, 2022.

Distributions are not guaranteed and are subject to change.

1 Latest declared distribution per share annualized and divided by the current share price.

2 Distributions may be paid from sources of income other than ordinary income, such as short term capital gains, long term capital gains or return of capital. If a distribution consists of something other than ordinary income, a 19 notice detailing the anticipated source of the distribution will be made available. The 19 notice will be posted to the Funds website and to the Depository Trust & Clearing Corporation so that brokers can distribute such notices to Shareholders of the Fund. Section 19 notices are provided for informational purposes only and not for tax reporting purposes. The final determination of the source and tax characteristics of all distributions in a particular year will be made after the end of the year. This information is not legal or tax advice. Consult a professional regarding your specific legal or tax matters.

3 Represents the amount of financial leverage the Fund currently employs as a percentage of total Fund assets.

The Differences Between Uits And Mutual Funds

Public Bank Bond Fund

Mutual funds are open-ended funds, meaning that the portfolio manager can buy and sell securities in the portfolio. The investment objective of each mutual fund is to outperform a particular benchmark, and the portfolio manager trades securities to meet that objective. A stock mutual fund, for example, may have an objective to outperform the Standard & Poors 500 index of large-cap stocks.

Many investors prefer to use mutual funds for stock investing so that the portfolio can be traded. If an investor is interested in buying and holding a portfolio of bonds and earning interest, that individual may purchase a UIT or closed-end fund with a fixed portfolio. A UIT, for example, pays the interest income on the bonds and holds the portfolio until a specific end date when the bonds are sold and the principal amount is returned to the owners. A bond investor can own a diversified portfolio of bonds in a UIT, rather than manage interest payments and bond redemptions in a personal brokerage account.

There are stock and bond UITs, but bond UITs are typically more popular than their stock counterparts, as they offer predictable income and are less likely to suffer losses.

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