Vanguard doubles its municipal bond ETF offering

Jan 31st, 2024 | By | Category: Fixed Income

Vanguard has expanded its line-up of municipal bond ETFs with two new cost-efficient index-based funds providing national intermediate-term and California-specific broad maturity exposures.

Sara Devereux, Global Head of Vanguard Fixed Income Group

Sara Devereux, Global Head of Vanguard Fixed Income Group.

The Vanguard Intermediate-Term Tax-Exempt Bond ETF (VTEI US) and Vanguard California Tax-Exempt Bond ETF (VTEC US) have been listed on Cboe BZX Exchange.

Sara Devereux, Global Head of Vanguard Fixed Income Group, commented: “The continued expansion of our tax-exempt bond ETF line-up brings advisors and individual investors new ways to access the municipal market with a low-cost and diversified portfolio.”

VTEI tracks the S&P Intermediate Term National AMT-Free Municipal Bond Index, a market value-weighted benchmark that includes investment-grade US municipal bonds with remaining maturities between one month and twenty years. The fund comes with an expense ratio of just 0.08%, notably below the 0.37% average for funds in the same Morningstar category.

VTEC, meanwhile, carries a localized appeal for California residents by providing a yield that is tax-exempt at both the federal and state levels. Representing Vanguard’s first state-specific municipal bond ETF, VTEC is linked to the S&P California AMT-Free Municipal Bond Index which covers the entire maturity spectrum of California’s investment-grade municipal bond market. The fund also has an expense ratio of 0.08%, 19 basis points lower than the industry average of 0.27% for similar funds.

The new listings complement Vanguard’s existing two municipal bond ETFs which deliver broad market and short-term exposures across the national tax-exempt universe. Those funds are the $34.4bn Vanguard Tax-Exempt Bond ETF (VTEB US) and $420 million Vanguard Short-Term Tax-Exempt Bond ETF (VTES US) which have expense ratios of 0.05% and 0.07%, respectively.

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