Summary

• Muni credit conditions appeared resilient, with year‑to‑date defaults down roughly 70% year-over-year. Defaults are expected to remain limited in 2026 and in sectors with unique challenges.
• The ongoing conflict in the Middle East has increased inflation expectations and interest rate volatility, even as broader liquidity conditions remain stable.
• Recent investment outflows are largely tax-driven and may offer potential entry points for investors seeking tax‑efficient and short‑duration municipal exposure.

By Mark Paris, Chief Investment Officer, Invesco Fixed Income, Municipals and Tim Spitz, Senior Client Portfolio Manager, Team Lead

Overview

• Municipal credit conditions appeared resilient, with year-to-date defaults down roughly 70% year over year. Defaults are expected to

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