The Invesco Limited Term Municipal Income Fund demonstrated robust performance, with its Class A shares at Net Asset Value (NAV) surpassing the S&P Municipal Bond Investment Grade Short Intermediate Index. This positive showing occurred within a dynamic market landscape characterized by significant municipal bond issuance and shifts in monetary policy. The fund's strategy involves a constructive approach to duration and a positive outlook on credit quality, reflecting the overall health of the municipal market.

During the fourth quarter of 2025, the municipal market witnessed considerable activity. New municipal bond issuances totaled an impressive $143 billion for the quarter. More broadly, the year concluded with a record-breaking $584 billion in new issuances, exceeding the previous year's record of $509 billion. This surge in issuance highlights strong demand and continued investment opportunities within the municipal sector. Simultaneously, the US Federal Reserve adjusted its monetary policy by implementing two interest rate reductions of 0.25% each in October and December. These rate cuts likely influenced the bond market by making existing bonds with higher yields more attractive and potentially stimulating further economic activity.

The fund's management maintains a favorable perspective on bond duration, seeking to strategically incorporate longer-term securities into its portfolio when market conditions are appropriate and in line with established prospectus guidelines. This selective approach aims to optimize returns while managing risk. Furthermore, a confident stance is held regarding the fundamental strength of the municipal market. This optimism is underpinned by the consistent trend of credit rating upgrades outnumbering downgrades, indicating an improving credit profile across municipal entities. Such positive credit fundamentals typically contribute to greater stability and attractiveness for investors in municipal bonds.

Looking ahead, the fund continues to monitor market developments closely, including potential future actions by the Federal Reserve and ongoing trends in municipal credit. The strategic objective remains to capitalize on favorable market conditions and maintain a well-positioned portfolio that aligns with its investment goals. The blend of prudent duration management and a focus on strong credit fundamentals is expected to support the fund's performance in the evolving financial environment.