Danielle Singer:
Hello, I'm Danielle Singer, head of wealth management portfolios at Invesco, and I'm very excited to bring you the first episode of Rethink Portfolios, a new series from the Greater Possibilities Podcast. This show will go inside the decision-making process of portfolio managers, and we'll bring you in-depth conversations that explore how our experts manage risk, identify opportunities and navigate these ever-changing markets. Speaking of markets, our market-focused show with Brian Levitt and Jodi Phillips will continue as usual alongside this series. So please watch your podcast queue for the latest from them.
Now with that, let's get to our guest. Mark Paris is the chief investment officer and head of municipals for Invesco. I always get the pleasure to speak to Mark, but this is a really interesting time. We have surging energy prices that have put inflation back in the spotlight. The Federal Reserve is entering a new era under Kevin Warsh's leadership, and the midterm elections could bring back a divided government and impact federal spending priorities. So how is Mark and his team navigating all this? Let's find out.
Welcome to the podcast, Mark.
Mark Paris:
Great to be here. Thank you, Danielle.
Danielle Singer:
Now, before we jump in too deep, how would you usually explain municipal bonds to somebody that's not in finance?
Mark Paris:
So I always say, you wake up in the morning, you turn the lights on, we own the power company. You go brush your teeth, we own the water company. You get in your car, you drive to work, we probably own the toll road that you go to work on. So essential services are the backbone of the municipal bond world. Also, borrowing at the county level, at the state level. And then you've got hospitals, universities, school districts. These are all essential projects that get to borrow at a lower rate than corporate bonds because there's a federal law that says that municipalities can do that, and they save a lot of money in doing that. And then they provide a lot of great services in all these different areas that we touch every day.
Danielle Singer:
Wow. So for our listeners, these are things that they live and breathe, things that are very familiar to them. Now you're a seasoned professional in this space. I'd love to know, what are some of the things that have changed the most about this market since you started managing portfolios?
Mark Paris:
I get that question a lot. When you've been around a lot, you get some gray hairs and people start asking you stuff. Maybe the gray hairs are the things that change the most. But look, the reality is obviously technology has affected everybody. When I started on Wall Street in 1990, people didn't have computers on their desk necessarily. There certainly wasn't the internet. Now we're dealing with AI. And what I've learned over the years is you have to embrace change. You have to embrace technology. It is vital for how you provide value for shareholders, how you improve as an investment manager.
But I would also say that the more things have changed, the more they've actually stayed the same. Our market is an unquoted market. It's always been since I've been involved over 30 years now. An over-the-counter market where you have to negotiate prices, where you have to understand the supply and demand aspects of the market, where you have to have really strong relationships with traders, underwriters, salespeople, issuers. And so I always say, yes, you have to be there for technology and you have to adjust. But I also say that this is maybe not quite your father's muni market, but it still has a lot of the same things where advantages go to people who can understand how to take advantage of anomalies that exist in the marketplace.
Danielle Singer:
So this is one of those areas that almost really is, the more things change, the more they stay in the same.
Mark Paris:
Yes. Yes.
Danielle Singer:
And maybe why munis sometimes I think in a good way are called boring, right?
Mark Paris:
In a good way.
Danielle Singer:
In a good way, but we're going to dive into all the reasons-
Mark Paris:
Awesome.
Danielle Singer:
Why they're absolutely not. Let's continue on the current landscape, big picture for munis. What feels most important today for investors to understand about the marketplace?
Mark Paris:
So I think the most important thing is that we came out of a period of time post-COVID where rates were extremely low. And what I continue to hear from investors, from friends, from family members is, "My God, I can't make enough interest in this environment." Well, rates are significantly higher than they've been in quite some time. So I think investors are starting to feel that, starting to enjoy that. And the reality is that, for a long time, you really couldn't get a lot out of fixed income, but now you can clip that coupon, you can gross that up on a tax-exempt basis. And I think investors are excited about that.
Danielle Singer:
Very true. And you brought up a couple different dynamics there. What's more important today? Fundamentals or technicals?
Mark Paris:
I get that question all the time in the muni market. We are still a technically-driven market to a large extent because supply matters, how much new issuance is coming into the market. Parts of the curve where that supply is coming flows into the marketplace, what retail investors are putting into the product. So those are always vital things to look at. However, we are a credit shop, we believe. We have 24 dedicated credit analysts. These analysts do their own research. They look at the Moody's and the S&P reports, but what they really do is put their own proprietary rating on everything that we do.
So yes, it's still a very technical-driven market, but what is that credit doing? What is the competition of that credit? For instance, if we bought a hospital bond in the city of Chicago, what's the next hospital nearby that does similar things to it? How is that going to affect that bond's credit rating? What are the demographics of an area? Is it aging? Are more young people coming in? Those things matter for school districts, for tax basis. So I think always, to me, we start off at the fundamental level and then the analysts give us a strong fundamental opinion. And then the portfolio managers layer on that the technicals of supply and demand and what is going on in the actual over-the-counter, non-quoted market.
Danielle Singer:
That's really helpful. And I'm glad you brought up credit because we are going to dig into that topic in a minute. But you mentioned that investors might be really excited right now about munis. What area might you think they're underestimating though?
Mark Paris:
So I think people have had a little bit of shock here. Interest rates have moved up a lot the last few years. Your NAVs in bond funds, your prices of municipal bonds have gone down over the last few years. And I think people think that what happened in the past is going to happen in the future.
We actually disagree a little bit with that. We think that this is going to be a really positive carry year. We think that rates are going to be in a range this year. We talked about rates being higher, and so when you clip that coupon and gross it up, and so our hope this year is that investors understand that the last couple of years were a bit of anomaly in the muni market. There were a few different things going on. We had some talk about tax exemption going away for a while last year in the One Big Beautiful Tax Bill. Thank God that didn't happen. And that means that the tax exemption is going to last. Not only has it lasted for over 100 years, but I expect it to last going on in the future. So that's really positive.
So I would tell investors, don't be focused on the volatility of the last few years. Be focused on where the yields are. This could be more of a range year, more of a carry year. And they should feel a lot more positive about where the muni market is in 2026 than where it was the last several years.
Danielle Singer:
You read my mind, because thinking about what's on people's minds, headline risk, the macro. Again, before we dive into the technicals and the micro, is there a headline risk you think people are worried about that might be overblown?
Mark Paris:
Yeah. So look, I think you've heard a lot of people, you see people sometimes in the media, sometimes non-muni people, to be quite honest, that talk about general obligation bonds could be in trouble, that state budgets are not doing well, that the muni market is in danger. That is, to me, a little bit of the sky is falling. And I'll tell you why. Tax collections are really strong in this country. Tax collections come from three places in most states. That is property tax collections. Mortgage rates 6-7%. Housing prices continue to go up. We see that in this area, obviously. And so tax collections on property are going well.
Sales tax collections. Right before COVID, a law was passed, if you bought something online, you had to pay the state sales tax on that. So state sales tax collections have been very, very positive the last few years. States have surpluses. Most states have a good surplus. So I think the fears of whether they think that maybe the economy is going to slow down too much or states are going to spend money in the wrong ways, I think that can be a little bit blown out from times. When we do the microcredit research, we find that municipal credits are actually in a really good place because we're watching the tax collections, we're watching the local economies, and we're watching politically what the governments are doing.
Danielle Singer:
Really helpful. As a portfolio manager, I'm going to let you get carried away with the more technical stuff because I know that's where you're raring to go. Let's talk about rates and credit a bit. You mentioned this. Investors tend to not see periods of volatility as an opportunity, but they get nervous, right? They see this as a threat. How should investors think about muni bonds when interest rates are moving around as much as they have? And you talked about that a little bit, but maybe dive a bit deeper into the rate environment.
Mark Paris:
So look, we know that rates have been high. We will get a new Fed chair and we'll see what that means for rates. This economy is doing fine. It's not a runaway economy, but we also don't see it as necessarily a slowdown economy. So again, most of your return in the municipal bond market historically has been from the coupon. And so when you have strong managers that can find really good fundamental credits and really high coupons and hold those coupons for a long amount of time, that's a very valuable thing.
And I think that's a pretty powerful thing to get out of fixed income. It's not what you make, it's what you keep, and you don't have to pay taxes on the muni money. And I think that's where investors are starting to see, "Wow, a couple of years ago I couldn't get this, now I can, and when I gross it up, this is pretty good."
Danielle Singer:
See, not boring at all. You talked about the importance of credit research, the strength of it within your team, but I still think that, even though this is a very tangible part of the market for investors, they drive on the toll roads, they go to the hospitals, they're also very aware of some big household corporate names. So how should investors think about buying a bond from a city or a water department or a municipal instead of just buying that big famous company name?
Mark Paris:
So look, I think that municipal credits are rated. They're out there. They're strong revenue streams. We live here in New York City. The New York City Water and Sewer Authority is one of the strongest credits in the muni market, providing water, providing services to a vast majority of people. And they have a large amount of days cash on hand and they're doing just fine as a credit. The bridges and tunnels that we use in the city, my kids used to laugh at me. We'd go on a vacation and we'd land somewhere and they'd say, "Okay, Dad, tell us what you own. We know you own that tunnel authority, that bridge, that hospital, that university."
So again, as you said, those are the things that we can touch and we can feel and you can see them tangible. You're probably getting a bill at your house with one of the municipal bonds that we own in our portfolio. So it's not a known name, but it's something that you touch and see every day and know that we're doing solid credit research on those things to make sure that we're getting a good coupon and that the fundamentals are right.
Danielle Singer:
Your kids must have thought you were the king of New York owning all of these very important things. Speaking of which, as a born and raised New Yorker myself, I was really interested in Moody's revised outlook on New York. Any thoughts there?
Mark Paris:
Yeah, a lot of thoughts. So as you know, I was born and raised in Brooklyn. I went to college in Manhattan. I've worked my adult life in Manhattan, even though I've lived in New Jersey most of my adult life. I love New York. We were a little bit ahead of the rating agencies, which was great. So we had pared back a little bit, not because we were worried about the credit, but because when something goes on negative watch, you do see some price movements. So kudos to my analyst for being a little bit ahead of that. We are still very comfortable owning New York City. There are still a lot of things that this current administration by the mayor of New York, I mean, talk about that are going to be difficult for him to just do.
You've got a council in the city that has control over a lot of things like property tax. You have the state, which has control over a lot of other taxes. So I think it's going to be a little bit difficult to just enact certain types of change. In the meantime, you've got a very vibrant economy here. You try to get a reservation on a Monday night in New York City, it's not an easy thing to do. We look at the finances of New York City and New York State to be in very good shape. I think that the rating agencies wanted to just be cautious here because change always develops and this new administration is talking about a lot of change, but we're very comfortable owning New York.
We were a little bit ahead of the downgrade. Obviously it's something we're going to continue to monitor, but even when we look out one year, two years, three years, we think the economy in New York is going to be very good. We think that New York City bonds and New York State bonds are going to be solid investments. It just matters when you buy and sell them. And when they go cheap, you want to buy them.
Danielle Singer:
Very constructive comments and very helpful. Where else are you seeing resilience on the credit side?
Mark Paris:
So I think transportation has been one sector, specifically airports. I hear it a lot from folks who come visit us in the New York office. "Wow, I just got off the plane in LaGuardia. I can't believe this place. It looks so different than it did when I was younger." And that's what we're doing really across the country. The United States is putting money into infrastructure, putting money into airports, because origination and departure fees are strong at airports. Then concessions, what do you do when you're at an airport and you're stuck there for a while? You buy that $6 water, you go to the concession stand, you pay 20 bucks for a hamburger.
Danielle Singer:
The smell of Aunt Anne's pretzels.
Mark Paris:
All those things roll into fees for the airports. So airports have great cash on hand. I think back to the COVID crisis and everybody said, "Oh, what's going to happen? No one is traveling." Well, these airports had hundreds of days of cash on hand to weather that storm. These airports are very well run. Sometimes you go to a city and you find that the airport is more vibrant than the actual city that you're in. So there's so much activity. So transportation has been a great place for us.
I would say that some of the education charter schools have really become a much bigger thing in the country, specifically since the pandemic. And so where you do really good credit research, where you understand that there's a good management team in place, we've seen a lot of value there. And then the expansion of suburbs in places like Houston, Florida, California, we've been able to provide the infrastructure for the utilities in the pad that goes in for the house. We don't buy these things as shovel and dirt. We buy these things as houses are being bought and sold there. And then the house pays an assessment to the bond holder for the services that are provided. This is not 2008 where people own multiple houses and they don't live in them. These are primary residences that people are buying. And so we've seen a lot of value there.
The last thing I'd say is, we have a really keen eye right now on healthcare. The One Big Beautiful Bill does cut back on Medicare, Medicaid reimbursements. It'll be more towards the end of 2027 than now. We think there's going to be some selling in the hospital space where people get nervous. They hear that the One Big Beautiful Bill has cut this, and they say, "I don't want to own hospitals." Yet, hospitals that do elective surgery, hospitals that are in the birthing business, hospitals that have sometimes even an endowment or good fundraising possibilities, are in a good demographic area, have good, strong management, we should be able to pick through some of the selling that goes on and really find some good deals in that sector going forward.
Danielle Singer:
So in addition to those comments you just made on healthcare, when you look across maybe rates, yield, duration, credit, the whole spectrum, are there other risks you're monitoring that aren't necessarily keeping you up at night?
Mark Paris:
Yeah. Look, I think as a money manager, everything keeps you up at night. You manage billions of dollars, you realize that it's billions with a B and this is other people's money and you want to do the right thing for them. So I think that's really important to keep in mind, but certainly you have to follow when you manage a fixed income portfolio, what is your duration compared to what is out there in the marketplace? How is that duration going to move with interest rates? What can you do to mitigate that duration? Can you buy some shorter call bonds that can mitigate it? Can you buy some higher coupon bonds? So we're looking at the convexity of our portfolio, the duration of our portfolio, the structure.
Risk is a big part of what we do here at Invesco Fixed Income. I think there are two very strong things that we add to the table in Invesco Fixed Income. The risk parameters that we bring in from our risk team and the investment strategy team, which I'm a part of where we talk about where rates are going, where we talk about where the global economy is going, what the Fed is going to do. And so we bring in a lot of thoughts from the taxable side, from the mortgage side, from the rate side of things into how we're managing the dynamics of a fixed income portfolio. It is municipal bonds, but it's still fixed income.
Danielle Singer:
I love that you're starting to touch on the importance of education and really being 360. For our listeners, when we think about what's in it for them, what are some of the key takeaways? Let's start with, if I'm an investor and I invest in munis today, what should I think about success looking like in let's say five years time when I evaluate that portfolio?
Mark Paris:
So I think when you look at that, you want to know that you're getting a good rate of return, that your price of your bond or your NAV is not eroding that return. And some of that did happen in '22 and '23. Let's be fair. The Fed was very aggressive, rates moved very quickly, but you also had treasury returns that were significantly negative those years. So now that we're past that, I think where investors should see success is looking at their yearly grossed up returns in their potential, in whatever their specific tax bracket is. And if you're getting close to what traditionally you see getting in the equity market on a year-to-year basis in muni bonds with hopefully a little less volatility and price movement and not having to write that check to the tax man, I think that's a pretty successful story.
So, munis are going to be a little bit lower than treasuries on an absolute... With treasuries on an absolute basis, a little lower than credits on an absolute basis. But again, when you gross that up, that is where you should see and feel your success in clipping that higher coupon, which is again, significantly higher than we've seen in a while.
Danielle Singer:
So I think, based on those comments, we might already know the answer to this question, but how should investors think about the importance of muni bonds in their portfolio? Is it about the income? Is it about the taxes? Is it about the stability or it's always going to be about all three?
Mark Paris:
It's always going to be about all three, but I think what sometimes investors miss is the muni market is a pure play on the United States. We're not really worried about steel prices. Tariffs weren't that big of a hit to the muni market. Even oil shocks that we've seen in the past, I remember when Brexit hit and everybody said, "What does that mean for the muni market?" Not a whole lot. This is about local communities, this is about states, this is about the services that they provide. And there's a really good low correlation in munis to the equity market. When you buy a corporate bond, that corporate bond usually has an equity component to it. And if the equity starts to sell off, you're going to see some volatility in that corporate bond, even if rates don't move.
We don't have that in munis. So you have a little bit of a buffer there. I think munis are a great addition to your portfolio because you're investing in infrastructure in the United States and services in the United States. You don't have that global look so that you don't have the geopolitical necessary risk to it. And I think that the tax exemption, therefore, gives you that extra component of, "I don't have to write the check to the IRS." So a little bit of what you all said, but I also believe that the fact that munis are specifically for the United States gives it a bit of an advantage to have a part of your portfolio that is U.S.-centric.
Danielle Singer:
I think that's a great point. And also it gives an investor options. How do you want that exposure?
Mark Paris:
Exactly.
Danielle Singer:
How do you want to own it? What about the listeners that are thinking, "Yeah, this sounds great, but it's only for the rich. It's only for the high income investors." What do you say to that?
Mark Paris:
So I think that's a bit of a misnomer. Nobody wants to pay taxes. I think you can always find a rate that makes sense. And I say this a lot to young people, "You may want to start owning munis now while your income is here, because as your income gets to here, you're going to feel good about moving it." And what I said, low to high. I know we're doing a podcast.
Danielle Singer:
Can't see the hand movements.
Mark Paris:
Sorry about that.
Danielle Singer:
We get it. We get it. I want to turn a little bit to some personal reflections. Is there something that you've learned over your time managing muni portfolios that people might surprisingly not know?
Mark Paris:
Yeah. So I think that you feel an obligation. And I talked about this a little bit earlier. This is a lot of money. I'm a kid from Brooklyn and to see, again, billions with a B, I know that I feel a sense of obligation to our shareholders. I know my team feels a sense of... I love when I get on a team call and I hear, "my fund", "our fund", and I hear that from credit analysts. I hear that from quantitative people. I hear that from portfolio management. Everybody has a vested interest in doing what's right for the shareholder. And I think sometimes you see a headline on Wall Street, "This Wall Street person makes this much, this firm is doing that." We are here for our clients. We are here for our shareholders and we care deeply about them.
And I will tell you that when I talk to members of my team about a bond, about the performance in the portfolio, about what we're doing, it's always with that underlying current of, what is best for the shareholders and how are we doing things? And I've been here a long time. This is my 24th year here at Invesco, and I feel like that's been the driving force of what keeps our department focused and what keeps our department grounded. And we're always going to have that philosophy. Shareholder first, care, thoughtfulness. Not what's important for us, what's important for the shareholder.
Danielle Singer:
I think our listeners probably really appreciate hearing that and clears up some maybe misconceptions about portfolio management and Wall Street and the like. Speaking of misconceptions, what is maybe one other misconception about muni bonds that you'd love to clear up?
Mark Paris:
So I think people hear municipal bonds and we talk about the fact that it's a non-quoted market and the word illiquidity comes up. I've been in this business a long time, over 30 years. This is not an illiquid market. This is a market where professionals can find liquidity. We have a very large amount of municipal bonds that we manage in high-grade, high-yield, down the curve, up the curve, separately managed accounts. And so we know how to negotiate with the street. We know how to get liquidity when we need it. We know how to manage the portfolio so that there are pockets of liquidity and pockets of yield that's throwing off good yield that maybe we don't want to actively sell. So I hear a lot from other markets, "Well, the muni market isn't as liquid as the treasury market." No, nothing is as liquid as the treasury market, but we're not as illiquid as people think.
Good managers who create good portfolios. I always tell my portfolio managers, "Don't tell me you have no liquidity when you need liquidity. You better be building liquidity up constantly in the portfolio." And so, I get a little bit personal about it because I've been in the muni market a long time. I've worked with people on our staff who've been with me a long time, and we always feel like that's a little bit of a bad rap. We find liquidity when we need it because we have good relationships, we build portfolios the right way and we understand the dynamics of the muni market.
Danielle Singer:
Mark, I think we've given our listeners a lot to chew on around municipal investments. It has been an absolute pleasure.
Mark Paris:
Thank you, Danielle.
Danielle Singer:
Thank you. And catch you all next time.
Important information
You've been listening to Invesco's Greater Possibilities podcast, Rethink Portfolios.
The opinions expressed are those of the speakers, are based on current market conditions as of April 10, 2026, and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions. Should this content contain any forward looking statements, understand that they are not guarantees of future results. They involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from expectations.
All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
Investments cannot be made directly in an index.
Diversification does not guarantee a profit or eliminate the risk of loss.
Mortgage rates sourced from Freddie Mac.
Discussions about most of the return in the municipal bond market coming from the coupon based on Bloomberg Municipal Bond Index data sourced from Morningstar and Bloomberg from 2011 through 2025.
The Bloomberg Municipal Bond Index is an unmanaged index considered representative of the investment grade tax-exempt bond market.
Discussion about negative Treasury returns in 2022 and 2023 based on the Bloomberg US Treasury Total Return Index, which measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury.
Discussion about the correlation between municipal bonds and the equity market sourced from Bloomberg as of Dec. 31, 2025. The 10-year correlation between The Bloomberg Municipal Bond Index and the S&P 500 Index was 0.44.
The 30-year AAA muni-to-Treasury ratio was 92% as of March 31, 2026, sourced from Bloomberg.
Discussion about tax-equivalent coupons for muni bonds sourced from Bloomberg, based on the Bloomberg Municipal Bond Index as of March 31, 2026. The tax-equivalent yield for an investor in the top tax bracket is near its high over the past 15 years.
Fixed income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Municipal securities are subject to the risk that legislative or economic conditions could affect an issuer’s ability to make payments of principal and/or interest.
High yield bonds, or junk bonds, involve a greater risk of default or price changes due to changes in the issuer’s credit quality. The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.
The health care industry is subject to risks relating to government regulation, obsolescence caused by scientific advances, and technological innovations.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
Correlation is the degree to which two investments have historically moved in relation to each other.
A coupon is the annual interest rate paid on a bond, expressed as a percentage of the face value.
“Grossing up” refers to the fact that municipal bond interest is generally exempt from federal income tax. You would require a higher yield on a taxable bond to end up with the same income on an after-tax basis.
The yield curve plots interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates to project future interest rate changes and economic activity.
"Carry" refers to the income earned from holding a bond over a specific period, primarily derived from its coupon payments minus any financing costs.
A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments, or other debts.
Duration is a measure of the sensitivity of the price (the value of principal) of a fixed income investment to a change in interest rates.
A general obligation bond is backed by the credit and taxing authority of the issuer rather than revenue from a project.
Net asset value (NAV) is the per-share value of open-end and closed-end funds and exchange-traded funds (ETFs).
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