Vanguard lines up two new municipal bond ETFs

Oct 30th, 2023 | By | Category: Fixed Income

Vanguard has announced plans to broaden its offering of municipal bond investment products with two new low-cost index-based ETFs – the Vanguard Intermediate-Term Tax-Exempt Bond ETF (VTEI US) and Vanguard California Tax-Exempt Bond ETF (VTEC US).

Vanguard lines up two new municipal bond ETFs

Vanguard is set to add two more funds to its line-up of low-cost municipal bond ETFs.

Managed by Vanguard’s Fixed Income Group, which has a four-decade tenure in overseeing municipal bond portfolios, the new ETFs are set to deliver specialized solutions in the tax-exempt bond space.

VTEI will target municipal bonds with intermediate-term duration. The fund will have an expense ratio of just 0.08%, notably below the 0.37% average for funds in the same category.

VTEC, meanwhile, will carry 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, the fund will also have an expense ratio of 0.08%, 20 basis points lower than the industry average of 0.28% for similar funds.

The new products will augment Vanguard’s existing offerings in broad market and short-term national tax-exempt ETFs – the $27.8 billion Vanguard Tax-Exempt Bond ETF (VTEB US) and $230 million Vanguard Short-Term Tax-Exempt Bond ETF (VTES US).

Commenting on the upcoming listings, Dan Reyes, Global Head of Vanguard Portfolio Review Department, said: “Vanguard continues to build its lineup of ETFs designed to meet investors’ distinct objectives and specific risk-reward preferences. These new strategies will offer tax-sensitive investors low-cost exposure to important segments of the municipal bond market through the ETF product structure.”

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