On Thursday, Vanguard expanded its selection of fixed income ETFs with the launch of the Vanguard Long-Term Tax-Exempt Bond ETF (VTEL) and the Vanguard New York Tax-Exempt Bond ETF New York Tax-Exempt Bond ETF (MUNY).
Both of these new Vanguard funds offer a distinct strategy for building municipal bond exposure. Each fund operates with a net expense ratio of 9 basis points.
“Vanguard’s ongoing expansion of our bond ETF lineup empowers financial advisors and individual investors with low-cost, and highly diversified options to tap into the municipal bond market,” said Sara Devereux, global head of Vanguard’s Fixed Income Group. “The launch of VTEL and MUNY highlights our unwavering commitment to meeting the dynamic needs of investors who prefer the ETF wrapper for their bond investments. These ETFs bring together our unparalleled institutional-quality municipal bond expertise with some of the lowest costs in the industry, setting a new standard in the market.”
Tax-Aware Municipal Strategies
With a long-term time horizon, VTEL looks to track the S&P 10+ Year National AMT-Free Municipal Bond Index. This index correspondingly focuses on muni bonds with remaining maturities of 10 years or higher. Notably, both the fund and its underlying index focus on muni bonds that pay interest are exempt from Federal taxes. This includes both U.S. federal income taxes and the federal alternative minimum tax.
Built for New York residents that are wary of taxes, MUNY looks to track the S&P New York AMT-Free Municipal USD10 Million Par Bond Index. This index focuses on muni bonds issued by the state of New York. It has a primary focus on those who have interest payments immune from U.S. federal income taxes. It also focuses on those who have interest payments immune from the federal alternative minimum tax.
Accessing Vanguard's Expertise
VTEL and MUNY enter the ETF arena as advisors remain interested in building their municipal bond exposure. Given Vanguard’s extensive experience in navigating fixed income, these new funds could be in pole position to deliver compelling results. Additionally, the tax-conscious focus from both funds could help to bolster portfolio income.
“At a VettaFi’s Income Strategy Symposium in May, many advisors told us that municipal bonds were the most appealing part of the bond market,” said Todd Rosenbluth, head of research at VettaFi. “Vanguard has a popular suite of index-based municipal bond ETFs but it is great to see them broaden their lineup.”
Many of Vanguard’s existing municipal bond offerings have seen substantial interest from investors this year. For instance, the Vanguard Tax-Exempt Bond ETF (VTEB ) offers compelling exposure to investment-grade U.S. munis with a focus on tax-awareness and intermediate portfolio duration. FactSet data shows that VTEB has seen an astounding $3.48 billion in net flows over the past year. That data point is as of May 20, 2025.
VTEB isn’t the only tax-aware Vanguard muni fund seeing significant flows in 2025. One such fund is the Vanguard Short-Term Tax Exempt Bond ETF (VTES ), which offers a focus on U.S. munis with maturities between one month to seven years. As of May 20, 2025, VTES has experienced over $530 million in net flows over the last 12 months. That data point is according to FactSet.
For more news, information, and analysis, visit the Fixed Income Channel.
