Vanguard has introduced its first US-listed ETF in nearly two years with the launch of a municipal bond fund targeting tax-exempt securities at the front end of the yield curve.

Sara Devereux, Global Head of Vanguard Fixed Income Group.

The Vanguard Short-Term Tax-Exempt Bond ETF (VTES US) has been listed on NYSE Arca with an expense ratio of just 0.07%.

The ETF is managed by Vanguard Fixed Income Group with day-to-day operations directed by the same team that oversees the $27.6bn Vanguard Tax-Exempt Bond ETF (VTEB US).

Launched in August 2015, VTEB has become a notable challenger to the more seasoned iShares National Muni Bond ETF (MUB US) which is the largest muni bond ETF on the market with $31.9bn current assets under management. Both ETFs deliver broad exposure to the investment-grade, fixed-rate municipal bond market; however, VTEB’s expense ratio of 0.05% is two basis points cheaper than the 0.07% charged by MUB.

VTES’s price tag, meanwhile, matches that of the $10.4bn iShares Short-Term National Muni Bond ETF (SUB US) which tracks an index consisting of municipal bonds with remaining maturities between one month and five years.

VTES delivers a slightly longer duration profile as its underlying index – the S&P 0-7 Year National AMT-Free Municipal Bond Index – covers investment-grade, fixed-rate US municipal bonds with maturities between one month and seven years. Eligible bonds must be denominated in US dollars and have a minimum par amount outstanding of $25 million.

Commenting on the new listing, Sara Devereux, Global Head of Vanguard Fixed Income Group, said: “The Vanguard Short-Term Tax-Exempt Bond ETF is built to optimize tax efficiency for investors seeking to allocate to the shorter end of the municipal bond market. The new ETF complements our broad fixed income line-up and provides clients with another avenue to tap our municipal bond team’s talent and capabilities.”