Vanguard Doubles Down On Munis With Two New ETFs — Just In Time For Tax-Weary Investors

While municipal bond inflows swell and tax season tastes like bitter almonds, Vanguard is dishing up new relief for income-hungry investors, once more with two brand-new low-cost ETFs designed for long-term strategy and local benefit.

The company launched today the Vanguard Long-Term Tax-Exempt Bond ETF (BATS:VTEL) and the Vanguard New York Tax-Exempt Bond ETF (BATS:MUNY), bringing its muni ETF lineup to six and its entire municipal lineup (which includes six index ETFs, two active ETFs, 12 active mutual funds, one index mutual fund, and three money market funds) to 24.

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VTEL provides investors with exposure to longer-term municipal bonds, a good wager for those expecting rate reductions or wanting to fix returns. MUNY targets debt issued by New York, providing a concentrated defense for residents who want to limit both state and federal tax nibbles.

Both ETFs have a low cost of 0.09%, in line with Vanguard’s promise of quality without the cost. Both funds are passively managed, providing investors with a no-frills, index-based strategy in an otherwise complicated corner of the bond market.

The timing isn't coincidental. Investors have poured into municipal bond ETFs this year, with the flagship Vanguard Tax-Exempt Bond ETF (NYSE:VTEB) alone pulling in $3.48 billion in net flows over the past year, according to FactSet data as of May 20. That surge underscores growing demand for tax-aware, duration-managed products amid uncertainty around rates and inflation.

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Vanguard’s newest additions complete a strategy that more and more serves the “do-it-yourself allocator.” With national muni exposure through VTEB and Vanguard Short-Term Tax-Exempt Bond ETF (NYSE:VTES), state-specific accessibility through Vanguard California Tax-Exempt Bond ETF (BATS:VTEC) and now MUNY (New York), and longer-duration flexibility through VTEL, advisors and individuals can now construct more thoughtful municipal ladders without leaving the Vanguard world.

For a company more famous for steady fingers than glitzy headlines, Vanguard’s muni ETF movements might appear subtle, but in a yield-starved environment replete with tax pitfalls, that’s precisely the sort of low-key plan investors are on the hunt for.

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