Government
US Municipals: A tale of two markets and a knight in shining armor
US Municipals: A tale of two markets and a knight in shining armor

The municipal bond market has seen a nice recovery in investment grade names over the last few weeks. The new issue calendar remains light, with the big coupon reinvestment and maturity months of June and July right around the corner. The few large new issues that have come to market (a USD800 million state of Illinois General Obligation bond and a roughly USD2 billion state of New York Metropolitan Transit Authority issue) have been well oversubscribed. The high yield segment of the market is still lagging, but demand appears to be picking up recently.
Yields on investment grade municipal bonds (as represented by the Bloomberg Barclays Municipal Bond Index), have recovered to roughly where they stated the year, though they are still above the lows reached prior to the pandemic in early March (Figure 1). However, yields represented by the Barclays Bloomberg Municipal High Yield Index are still well above the levels reached at the beginning of the year and the lows set before the pandemic. Accordingly, the spread, or difference between the two yields, has steadily increased since March. We believe this presents an opportunity to be taken advantage of by active managers. Many names in the high yield or BBB space have been guilty by association – we believe careful credit work can be advantageous and help position portfolios to benefit from this spread going forward.
Figure 1: High Yield Municipal Yields Have Lagged Investment Grade

A concern on the minds of many market participants is the potential for defaults in the municipal market, which we do not anticipate. To be sure, there will probably be a few defaults that make splashy headlines, but we believe the vast majority of municipal bonds will continue to pay coupons and principal as they come due. What makes us confident in stating this? The federal government has taken decisive action, arriving like a knight in shining armor with financial support (Figure 2). The Municipal Liquidity Facility (MLF) was established to provide market access for states, large cities and large counties and is almost up and running. The mere establishment of the MLF has provided comfort and stability to the municipal market and we believe it will likely help troubled borrowers the most. This support comes on top of the liquidity that the federal government provided in late March to stabilize the ultra-short segment of the municipal market.
Figure 2: Stimulus Funds (USD billion)

The economy had experienced an unprecedented period of growth prior to the global pandemic, resulting in strong balance sheets and ample cash on hand among many municipal issuers. We believe now is the time for active managers to sift through the noise, headlines and speculation to find the diamonds in the rough. As the US Congress debates additional stimulus to aid municipal issuers, we can’t help but think about who will pay the resulting bill. Much of the burden will potentially fall onto taxpayers, which makes the tax exemption provided by municipal bonds that much more attractive.
Municipal Sector Focus
Senior Living
The pandemic has shifted media focus onto the senior living sector, and rightfully so. Unfortunately, the coronavirus has hit our elderly population and senior living facilities the hardest. However, not all senior living facilities are the same. Because nursing homes provide the highest level of medical care for older adults outside of a hospital, this specialization makes them different from other senior housing facilities. Licensed physicians supervise each patient’s care and other medical professionals are almost always on the premises. Skilled nursing care is available on site, usually 24 hours a day. There are approximately 15,600 nursing homes in the US with 1.4 million patients and nearly 70% are for-profit.1 These facilities tend to be used by elderly patients in the last stages of their lives.
At Invesco Fixed Income, we focus on Continuing Care Retirement Communities (CCRC). There are approximately 2,000 CCRCs in the US with around 80% considered not-for-profit.2 A CCRC, which is also referred to as a Life Plan Community, is a facility where a resident has access to multiple levels of care on a single campus. The benefit of this continuum of care is that residents can age in one place as their health changes over the years. Typically, a CCRC offers a combination of independent living, assisted living and/or nursing care. Roughly half of outstanding CCRC debt is non-rated, making credit research and analysis vitally important when investing in these bonds. With over 10,000 baby boomers turning 65 daily, we continue to believe there will be strong demand for this sector, especially post-pandemic.3
One of the many under-appreciated features of a CCRC is the sense of community these facilities provide to their residents. Meals, medicine, groceries and supplies are delivered to their doors. Residents receive frequent wellness checks and facilities are taking extraordinary care to protect residents and employees against the coronavirus. While these features increase costs, much of the CCRC sector is able to withstand these headwinds. We believe understanding the individual balance sheets and issues facing each issuer gives us a competitive edge when positioning our holdings for long-term success.
US States
States experienced significant revenue declines in April and May, and many will likely face difficult decisions in upcoming budget discussions. Income and sales taxes, two of the largest revenue streams, will likely be down, while increased expenditures to fight the coronavirus are also weighing on state budgets. Many of these difficulties should be ameliorated by federal government support. The CARES Act, for example, provides USD150 billion for state and local governments (Figure 2), the establishment of a Disaster Relief Fund, and additional funding for state agencies and municipalities. While we expect to see further credit bifurcation, with the weak getting weaker and the potential for credit downgrades on the horizon, we do not believe we will see defaults. One of the essential tools states have to navigate the difficult fiscal times ahead is access to the municipal market. A default would likely destroy the very tool that they need now and potentially down the road.
Footnotes
1 Source: CDC, https://www.cdc.gov/nchs/fastats/nursing-home-care.htm, March11, 2016.
2 Source: AARP, https://www.aarp.org/caregiving/basics/info-2017/continuing-care-retirement-communities.html. Oct. 24, 2019.
3 Source: US Census Bureau, https://www.census.gov/library/stories/2019/12/by-2030-all-baby-boomers-will-be-age-65-or-older.html, Dec. 10, 2019.
Important Information
Blog Header Image: Raymond Forbes LLC / Stocksy
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Past performance is not a guide to future returns.
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.
All or a portion of the fund’s otherwise tax-exempt income may be subject to the federal alternative minimum tax.
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.
Derivatives may be more volatile and less liquid than traditional investments and are subject to market, interest rate, credit, leverage, counterparty and management risks. An investment in a derivative could lose more than the cash amount invested.
Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.
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.
Securities which are in the medium- and lower-grade categories generally offer higher yields than are offered by higher-grade securities of similar maturity, but they also generally involve more volatility and greater risks.
Investing in municipal securities issued by entities having similar characteristics may make the fund more susceptible to fluctuation.
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.
The opinions referenced above are those of the authors as of April 9, 2020. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements 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.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial advisor/financial consultant before making any investment decisions. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Before investing, investors should carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund(s), investors should ask their advisors for a prospectus/summary prospectus or visit invesco.com/fundprospectus.
International
What Follows US Hegemony
What Follows US Hegemony
Authored by Vijay Prashad via thetricontiental.org,
On 24 February 2023, the Chinese Foreign Ministry released a…

Authored by Vijay Prashad via thetricontiental.org,
On 24 February 2023, the Chinese Foreign Ministry released a twelve-point plan entitled ‘China’s Position on the Political Settlement of the Ukraine Crisis’.
This ‘peace plan’, as it has been called, is anchored in the concept of sovereignty, building upon the well-established principles of the United Nations Charter (1945) and the Ten Principles from the Bandung Conference of African and Asian states held in 1955. The plan was released two days after China’s senior diplomat Wang Yi visited Moscow, where he met with Russia’s President Vladimir Putin.
Russia’s interest in the plan was confirmed by Kremlin spokesperson Dmitry Peskov shortly after the visit: ‘Any attempt to produce a plan that would put the [Ukraine] conflict on a peace track deserves attention. We are considering the plan of our Chinese friends with great attention’.
Ukraine’s President Volodymyr Zelensky welcomed the plan hours after it was made public, saying that he would like to meet China’s President Xi Jinping as soon as possible to discuss a potential peace process. France’s President Emmanuel Macron echoed this sentiment, saying that he would visit Beijing in early April. There are many interesting aspects of this plan, notably a call to end all hostilities near nuclear power plants and a pledge by China to help fund the reconstruction of Ukraine. But perhaps the most interesting feature is that a peace plan did not come from any country in the West, but from Beijing.
When I read ‘China’s Position on the Political Settlement of the Ukraine Crisis’, I was reminded of ‘On the Pulse of Morning’, a poem published by Maya Angelou in 1993, the rubble of the Soviet Union before us, the terrible bombardment of Iraq by the United States still producing aftershocks, the tremors felt in Afghanistan and Bosnia. The title of this newsletter, ‘Birth Again the Dream of Global Peace and Mutual Respect’, sits at the heart of the poem. Angelou wrote alongside the rocks and the trees, those who outlive humans and watch us destroy the world. Two sections of the poem bear repeating:
Each of you, a bordered country,
Delicate and strangely made proud,
Yet thrusting perpetually under siege.
Your armed struggles for profit
Have left collars of waste upon
My shore, currents of debris upon my breast.
Yet today I call you to my riverside,
If you will study war no more. Come,
Clad in peace, and I will sing the songs
The Creator gave to me when I and the
Tree and the rock were one.
Before cynicism was a bloody sear across your
Brow and when you yet knew you still
Knew nothing.
The River sang and sings on.…
History, despite its wrenching pain
Cannot be unlived, but if faced
With courage, need not be lived again.
History cannot be forgotten, but it need not be repeated. That is the message of Angelou’s poem and the message of the study we released last week, Eight Contradictions of the Imperialist ‘Rules-Based Order’.
In October 2022, Cuba’s Centre for International Policy Research (CIPI) held its 7th Conference on Strategic Studies, which studied the shifts taking place in international relations, with an emphasis on the declining power of the Western states and the emergence of a new confidence in the developing world. There is no doubt that the United States and its allies continue to exercise immense power over the world through military force and control over financial systems. But with the economic rise of several developing countries, with China at their head, a qualitative change can be felt on the world stage. An example of this trend is the ongoing dispute amongst the G20 countries, many of which have refused to line up against Moscow despite pressure by the United States and its European allies to firmly condemn Russia for the war in Ukraine. This change in the geopolitical atmosphere requires precise analysis based on the facts.
To that end, our latest dossier, Sovereignty, Dignity, and Regionalism in the New International Order (March 2023), produced in collaboration with CIPI, brings together some of the thinking about the emergence of a new global dispensation that will follow the period of US hegemony.
The text opens with a foreword by CIPI’s director, José R. Cabañas Rodríguez, who makes the point that the world is already at war, namely a war imposed on much of the world (including Cuba) by the United States and its allies through blockades and economic policies such as sanctions that strangle the possibilities for development. As Greece’s former Finance Minister Yanis Varoufakis said, coups these days ‘do not need tanks. They achieve the same result with banks’.
The US is attempting to maintain its position of ‘single master’ through an aggressive military and diplomatic push both in Ukraine and Taiwan, unconcerned about the great destabilisation this has inflicted upon the world. This approach was reflected in US Defence Secretary Lloyd Austin’s admission that ‘We want to see Russia weakened’ and in US House Foreign Affairs Committee Chairman Michael McCaul’s statement that ‘Ukraine today – it’s going to be Taiwan tomorrow’. It is a concern about this destabilisation and the declining fortunes of the West that has led most of the countries in the world to refuse to join efforts to isolate Russia.
As some of the larger developing countries, such as China, Brazil, India, Mexico, Indonesia, and South Africa, pivot away from reliance upon the United States and its Western allies, they have begun to discuss a new architecture for a new world order. What is quite clear is that most of these countries – despite great differences in the political traditions of their respective governments – now recognise that the United States ‘rules-based international order’ is no longer able to exercise the authority it once had. The actual movement of history shows that the world order is moving from one anchored by US hegemony to one that is far more regional in character. US policymakers, as part of their fearmongering, suggest that China wants to take over the world, along the grain of the ‘Thucydides Trap’ argument that when a new aspirant to hegemony appears on the scene, it tends to result in war between the emerging power and existing great power. However, this argument is not based on facts.
Rather than seek to generate additional poles of power – in the mould of the United States – and build a ‘multipolar’ world, developing countries are calling for a world order rooted in the UN Charter as well as strong regional trade and development systems. ‘This new internationalism can only be created – and a period of global Balkanisation avoided’, we write in our latest dossier, ‘by building upon a foundation of mutual respect and strength of regional trade systems, security organisations, and political formations’. Indicators of this new attitude are present in the discussions taking place in the Global South about the war in Ukraine and are reflected in the Chinese plan for peace.
Our dossier analyses at some length this moment of fragility for US power and its ‘rules-based international order’. We trace the revival of multilateralism and regionalism, which are key concepts of the emerging world order. The growth of regionalism is reflected in the creation of a host of vital regional bodies, from the Community of Latin American and Caribbean States (CELAC) to the Shanghai Cooperation Organisation (SCO), alongside increasing regional trade (with the BRICS bloc being a kind of ‘regionalism plus’ for our period). Meanwhile, the emphasis on returning to international institutions for global decision-making, as evidenced by the formation of the Group of Friends in Defence of the UN Charter, for example, illustrates the reinvigorated desire for multilateralism.
The United States remains a powerful country, but it has not come to terms with the immense changes taking place in the world order. It must temper its belief in its ‘manifest destiny’ and recognise that it is nothing more than another country amongst the 193 members states of the United Nations. The great powers – including the United States – will either find ways to accommodate and cooperate for the common good, or they will all collapse together.
At the start of the pandemic, the head of the World Health Organisation, Dr Tedros Adhanom Ghebreyesus, urged the countries of the world to be more collaborative and less confrontational, saying that ‘this is the time for solidarity, not stigma’ and repeating, in the years since, that nations must ‘work together across ideological divides to find common solutions to common problems’.
These wise words must be heeded.
Government
“True Stories… Could Fuel Hesitancy”: Stanford Project Worked To Censor Even True Stories On Social Media
"True Stories… Could Fuel Hesitancy": Stanford Project Worked To Censor Even True Stories On Social Media
Authored by Jonathan Turley,
While…

While lost in the explosive news about Donald Trump’s expected arrest, journalist Matt Taibbi released new details on previously undisclosed censorship efforts on social media. The latest Twitter Files revealed a breathtaking effort from Stanford’s Virality Project to censor even true stories. After all, the project insisted “true stories … could fuel hesitancy” over taking the vaccine or other measures. The effort included suppressing stories that we now know are legitimate such as natural immunity defenses, the exaggerated value of masks, and questions over vaccine efficacy in preventing second illnesses. The work of the Virality Project to censor even true stories should result in the severance of any connection with Stanford University.
We have learned of an ever-expanding coalition of groups working with the government and social media to target and censor Americans, including government-funded organizations.
However, the new files are chilling in the details allegedly showing how the Virality Project labeled even true stories as “anti-vaccine” and, therefore, subject to censorship. These files would suggest that the Project eagerly worked to limit free speech and suppress alternative scientific viewpoints.
Taibbi describes the Virality Project as “a sweeping, cross-platform effort to monitor billions of social media posts by Stanford University, federal agencies, and a slew of (often state-funded) NGOs.”
1.TWITTER FILES #19
— Matt Taibbi (@mtaibbi) March 17, 2023
The Great Covid-19 Lie Machine
Stanford, the Virality Project, and the Censorship of “True Stories” pic.twitter.com/v41dyC26ZR
He added: “We’ve since learned the Virality Project in 2021 worked with government to launch a pan-industry monitoring plan for Covid-related content. At least six major Internet platforms were ‘onboarded’ to the same JIRA ticketing system, daily sending millions of items for review.”
5.Just before @ShellenbergerMD and I testified in the House last week, Virality Project emails were found in the #TwitterFiles describing “stories of true vaccine side effects” as actionable content. pic.twitter.com/dKxTnxDc3a
— Matt Taibbi (@mtaibbi) March 17, 2023
According to Taibbi, it targeted anyone who did not robotically fall in line with the CDC and media narratives, including targeting postings that shared “Reports of vaccinated individuals contracting Covid-19 anyway,” research on “natural immunity,” suggesting Covid-19 “leaked from a lab,” and even “worrisome jokes.”
That included evidence that it “knowingly targeted true material and legitimate political opinion, while often being factually wrong itself.”
The Virality Project warned Twitter that “true stories … could fuel hesitancy,” including stories on “celebrity deaths after vaccine” and the closure of a central New York school due to reports of post-vaccine illness.
The Project is part of the Cyber Policy Center at Stanford and bills itself as “a joint initiative of the Freeman Spogli Institute for International Studies and Stanford Law School, connects academia, the legal and tech industry and civil society with policymakers around the country to address the most pressing cyber policy concerns.”
The Center launched the Project as a “a global study aimed at understanding the disinformation dynamics specific to the COVID-19 crisis.”
As with many disinformation projects, it became a source of its own disinformation in the effort to suppress alternative views.
It is being funded by Craig Newmark Philanthropies and the Hewlett Foundation.
On its website, it proclaims: “At the Stanford Internet Observatory our mission is to study the misuse of the internet to cause harm, and to help create policy and technical mitigations to those harms.” It defines its mission to maintain the truth as it sees it:
“The global COVID-19 crisis has significantly shifted the landscape for mis- and disinformation as the pandemic has become the primary concern of almost every nation on the planet. This has perhaps never happened before; few topics have commanded and sustained attention at a global level simultaneously, or provided such a wealth of opportunities for governments, economically motivated actors, and domestic activists alike to spread malign narratives in service to their interests.”
What is even more disconcerting is that groups like the Virality Project worked against public health by suppressing such stories that are now considered legitimate from the efficacy of masks to the lab origin theory. It was declaring dissenting scientific views to be dangerous disinformation. Nothing could be more inimical to the academic mission. Yet, Stanford still heralds the work of the Project on its website.
There is nothing more inherently in conflict with academic values than censorship. Stanford’s association with this censorship effort is disgraceful and should be a matter for faculty action. This is a project that sought to censor true stories that undermined government or media narratives.
I am not hopeful that Stanford will sever its connection to the Project. Censorship is now the rage on campuses and the Project is the perfect embodiment of this movement. Cloaking censorship efforts in self-righteous rhetoric, the Project sought to silence those who failed to adhere to a certain orthodoxy, including scientific and public health claims that were later found flawed or wrong. The Project itself is an example of what it called “media and social media capabilities – overt and covert – to spread particular narratives.”
Stanford should fulfill its pledge in creating the Virality Project in fighting disinformation by eliminating the Virality Project.
Government
Royal Caribbean Officially Makes Controversial Change
The cruise line has made a controversial change that some passengers will love while others will be angry.

The cruise line has made a controversial change that some passengers will love while others will be angry.
During the early days of the cruise industry's comeback from the covid pandemic, Royal Caribbean outlawed smoking in the casino. At the time, the Centers for Disease Control (CDC) required passengers to wear masks in public areas of the ship except when eating or drinking while stationary.
Smoking was, at first, a sort of loophole. People would smoke in the casino and remove their masks (or at least move them to the side) while playing slot machines. That basically meant that unlike drinking, where your mask could be moved and then replaced for a sip, smokers were essentially not wearing a mask.
DON'T MISS: Carnival Cruise Line Comments on a Possible (Very) Adult Change
Royal Caribbean (RCL) - Get Free Report closed that loop by fully outlawing smoking in its casinos while masks were still required. That was something that smokers weren't happy about, but probably understood given how large a role the CDC was playing in setting cruise ship rules.
Once the CDC stopped requiring masks (and regulating cruise ships at all), Royal Caribbean reverted to its pre-pandemic smoking policies. That meant that every casino on its ships had a smoking section. Technically, smoking is only allowed when actually playing a slot machine, but that's hard to enforce and the casinos quickly filled back up with smoke.
Now, the cruise line has officially made a long-rumored move that should make non-smokers really happy while angering a whole different group of the cruise line's passengers.
Image source: Matt Cardy/Getty Images
Oasis-Class Ships Getting Non-Smoking Area
Wonder of the Seas, the newest member of Royal Caribbean's Oasis class was originally built to sail out of China. It was moved to Florida due to the covid pandemic which created a sort of happy accident for non-smokers.
The ship was built with a secondary casino that was originally intended as a high rollers room. Once the ship was repurposed to sail from the United States, that smaller casino was shifted from an area designed to cater to big-money players into a non-smoking casino.
For months, it has been rumored that the cruise line would turn the "Jazz on 4" space -- the same location as the non-smoking "Golden Roon" on Wonder of the Seas -- into similar non-smoking casinos. Royal Caribbean never commented on those rumors, but it did warn passengers on some sailings that service in the Diamond Lounge, an area next to Jazz on 4 reserved for Diamond and higher members of the company's loyalty program, would be disrupted due to construction.
The results of that construction have been revealed on another Oasis-class ship, Harmony of the Seas. Johnny Travalor shared pictures of the new casino in a Facebook group for fans of Royal Caribbean's casinos.
"The brand new non-smoking casino on Harmony officially opened today and I have been here since the opening playing, donating!" he shared.
That's not official confirmation that all Oasis-class ships will have Jazz on 4 turned into a non-smoking casino, but all signs point in that direction.
Royal Caribbean Makes Some Passengers Mad
No change on a cruise ship will make all passengers happy. Some Royal Caribbean gamblers have suggested that the non-smoking area, which is much smaller than the original casino, should be the smoking area.
"Maybe once they see the non-smokers are bursting at the seam in that space and the smoking casino isn’t as crowded they will reverse it," Barb Boyer Green shared.
"That should be the smoking room...seems like the non-smokers are being put in a closet," Maureen Ethier added.
Not all passengers, however, are upset because of the size of the non-smoking area. Some are lamenting the loss of Jazz on 4, which hosted live jazz music.
"I think this is an overall loss, with now an entertainment area being taken over on this ship. I always enjoyed the jazz club and this will do nothing for the smell of the ship, net loss for all passengers" Justin Rogers wrote.
"It was our fav such a sad day. It was our escape, great talent, romantic, not another venue like it. Such a shame," added Julia Doumad.
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