Taxable Income : Taxable Municipal Funds

About Taxable Municipal Debt and Build America Bonds(BABs)

Municipal bonds are debt issued by a state, city, or other municipality for general governmental needs or to finance special projects.

Taxable municipal bonds may be issued by the same municipal entities that issue tax-exempt bonds. In April 2009, Build America Bonds (BABs), a new form of taxable municipal bonds, were first issued as part of the American Recovery and Reinvestment Act of 2009.

BABs are an alternative to tax-exempt bonds for state and local governments issued in 2009 and 2010. As part of a program designed to provide a federal subsidy for a larger portion of the borrowing costs of state and local governments than traditional tax-exempt bonds. The goal was to stimulate the economy and encourage investments in capital projects in 2009 and 2010. The interest on BABs is taxable to investors. As a result, the nominal interest rate on BABs is similar to interest paid by non-state and local government borrowers, such as corporations.

About Nuveen's Build America Bond Funds

These funds invest primarily in a diversified portfolio of Build America Bonds (BABs), which, under normal circumstances, will make up at least 80% of its managed assets. Up to 20% may be invested in other securities, including taxable and tax-exempt municipal securities and US Treasury and other government securities. At least 80% of the funds' managed assets will be invested in securities that are investment grade quality at the time of purchase, as rated by at least one NRSRO or judged to be of comparable quality by NAM. These funds use leverage.

As of 1/1/2013, there has been no new issuance of BABs or similarly US Treasury-subsidized taxable municipal bonds for a 24-month period. Because of this, the fund’s contingent term provision is now in force, and the fund will terminate on or around 6/30/2020, distributing the fund’s assets to shareholders at that time.

Investor Profile

Are these CEFs right for you?

The features and investment objectives of these funds might be especially appealing to investors seeking:
  • Potential for attractive, monthly income
  • Diversification of a portfolio otherwise comprised of taxable fixed-income and equity securities

What are potential risks?

  • Municipal bonds are subject to interest rate risk, or the risk that the bonds will decline in value because of changes in market interest rates.
  • Municipal bonds are also subject to call risk, and credit risk.

Nuveen's Taxable
Municipal Income CEFs

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