Vanguard Adds Short-Term Tax-Exempt Bond ETF – It’s First in Nearly Two Years

Vanguard Group Inc. is set to add a tax-exempt municipal bond ETF to its lineup in the first quarter of 2023, its first ETF in almost two years amid a surge of capital in the municipal bond space.

The Vanguard Short-Term Tax-Exempt Bond ETF will be managed by the Vanguard Fixed Income Group, according to the Valley Forge, Pennsylvania-based company.

The ETF will predominantly hold short-term investment grade municipal bonds and will track the S&P 0-7 Year AMT-Free Muni Bond index. It will have an estimated expense ratio of 0.07%, which compares with 0.54% for the average short-term bond fund, according to Vanguard.

“The new Short-Term Tax-Exempt Bond ETF has been thoughtfully constructed for tax-sensitive investors with a short time horizon and low risk tolerance, in complement to our broad range of municipal bond strategies,” Daniel Reyes, head of the Vanguard portfolio review department,” said.

Municipal bond funds have seen nearly $29 billion in inflows, according to Bloomberg data. The top-performing municipal bond ETF this year was the Vanguard Ultra Short Bond ETF, which pulled in nearly $11bn.