Western Asset Mortgage Opportunity Fund

DMO

Market cap $135M

DMO offers a high yield and a differentiated mortgage-focused portfolio, but distribution coverage has weakened. The fund's previous deep discount has disappeared, making it fairly valued and removing a reason why it could be considered appealing previously. On a brighter note, the fund is one of the best in terms of total returns over the long run in its peer group.

DMO offers a compelling 13.45% yield, far outpacing major bond indices, and most peers, but primarily invests in lower-quality, below-investment-grade mortgages. The fund's high leverage amplifies both returns and volatility; while total returns outperformed indices, net asset value, and share price have declined over time. Commercial mortgages remain troubled, and this could weigh on the fund's net asset value for the next few years.

NEW YORK--(BUSINESS WIRE)--Category: Financials.

Mortgage securities' diversification benefits and potential for higher yields with reduced volatility make them an attractive option for income-oriented investors. Discover Western Asset Management's unique approach to the strategy with the Western Asset Mortgage Opportunities Fund (DMO). Greg Handler, Portfolio Manager and Head of Mortgage and Consumer Credit with Western Asset Management shares outlook for the 2025 fixed income sector and more.

NEW YORK--(BUSINESS WIRE)--Category: Financials.

Western Asset Mortgage Opportunity Fund has outperformed since its initial "Buy" rating. The fund has reached fair value, and future returns will primarily come from dividends. DMO remains focused on non-agency RMBS bonds and GSE risk transfer securities, which carry credit risk.

We review CEF market valuation and performance through the first week of July and highlight recent market action. All CEF sectors finished the week in the green, with fixed-income CEF sector discounts now expensive and equity CEF sector discounts somewhat cheap. Saba and BlackRock came out with differing press releases on the latest proxy votes over board membership and termination of CEFs.

We review CEF market valuation and performance through the last week of June and highlight recent market action. CEFs were mostly up on the week with MLP and Hybrid sectors leading the way. Western Asset Global Corporate Defined Opportunity Fund holding a tender offer for all shares at NAV, following Nuveen's approach.

Western Asset Mortgage Opportunity Fund has increased its distribution for the fourth consecutive time. DMO primarily allocates to non-agency residential mortgages, with a smaller holding in commercial mortgages. The fund's net income has been steadily rising, driven by floating-rate holdings and increased borrowings.

NEW YORK--(BUSINESS WIRE)--Category: Financials.