The Invesco Municipal Trust (VKQ) maintains a diverse portfolio of US municipal bonds, providing tax-free income for investors, all the while preserving capital and generating risk adjusted returns, explains Todd Shaver, editor of Bull Market Report.

The fund is intended for conservative investors, who don’t want to put their capital at risk, and want a regular tax-free monthly income. There is plenty of volatility expected over the coming weeks, due to the tax-time selling, and the nearly $10 billion worth of new issues during the next few days.

This should result in increased supply, lower prices, and higher yields. Fed expectations, however, remain the dominant mover, with the next meeting three weeks away, and a 50 basis point hike on the horizon.

With COVID cases continuing to fall, and the election of Joe Biden, aligned with a Democrat controlled Congress, this scenario is expected to drive investments in local administrations and infrastructure, resulting in plenty of new issues in the coming quarters.

Default rates among municipal bonds remain as low as they’ve ever been, making this an absolute perfect investment for capital preservation. As mentioned earlier, investors need to brace for upcoming volatility, but this is only for investors looking to time the market, and not long term investors seeking consistent dividend income.

Municipal yields have moved higher over the past week, with short term yields posting the highest increases. Invesco’s track record and experienced management team should be able to weather any upcoming uncertainties.

This fund remains an integral part of our portfolio, given its low expense ratio of just 1.77%, and yields in excess of 5.39%, tax free. We maintain our Price Target at $15 per share.

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