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Vanguard Launches Two Tax-Exempt Bond ETFs

2 minute read   •   January 30, 2024
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Vanguard today launched Vanguard Intermediate-Term Tax-Exempt Bond ETF (VTEI) and Vanguard California Tax-Exempt Bond ETF (VTEC), two index municipal bond ETFs managed by Vanguard Fixed Income Group.

"The continued expansion of our tax-exempt bond ETF lineup brings advisors and individual investors new ways to access the municipal market with a low-cost and diversified portfolio," said Sara Devereux, global head of Vanguard Fixed Income Group.

Vanguard Intermediate-Term Tax-Exempt Bond ETF is designed for tax-sensitive investors with an intermediate-term time horizon and a preference for passive management. The new ETF has an expense ratio of 0.08%, compared with the average expense ratio for competing funds of 0.37%1.

Vanguard California Tax-Exempt Bond ETF is for tax-sensitive investors residing in California with an intermediate-term time horizon and preference for passive management. The new ETF has an expense ratio of 0.08%, compared with the average expense ratio for competing funds of 0.27%1.

Investors and advisors continue to gravitate to the ETF structure for its tax-efficiency and flexibility to trade at intraday market prices. In addition to these two new ETFs, Vanguard's $242 billion municipal bond lineup includes a wide range of active mutual funds, money market funds, and two other ETFs: Vanguard Tax-Exempt Bond ETF (VTEB), the firm's first municipal bond ETF, and Vanguard Short-Term Tax-Exempt Bond ETF (VTES).

Vanguard Fixed Income Group

For more than four decades, Vanguard Fixed Income Group has distinguished itself with deep investment capabilities, disciplined security selection processes, and rigorous risk management techniques. Vanguard is a pioneer in bond indexing and has successfully delivered tight benchmark tracking on a range of indexed fixed income strategies in both taxable and tax-exempt markets2.

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1Morningstar data as of November 30, 2023.

2In each of the past three years ending September 30, 98% or more of Vanguard fixed income index assets have tracked their benchmarks within risk-established tracking tolerances. Risk-established tracking tolerances are performance thresholds used to evaluate an index fund's tracking of its stated benchmark and are part of a prudent risk management process. (Source: Vanguard.)

All figures as of December 31, 2023, unless stated otherwise.


For more information about Vanguard funds, visit vanguard.com or call 800-523-1036 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

All investing is subject to risk, including the possible loss of the money you invest.

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. Investments in bonds are subject to interest rate, credit, and inflation risk.

Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund's trading or through your own redemption of shares. For some investors, a portion of the fund's income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax.

Vanguard Intermediate-Term Tax-Exempt Bond ETF and Vanguard California Tax-Exempt Bond ETF are not to be confused with the similarly named Vanguard Intermediate-Term Tax-Exempt Fund and Vanguard California Intermediate-Term Tax-Exempt Fund. These products are independent of one another. Differences in scale, certain investment processes, and underlying holdings are expected to produce different investment returns by the products. To obtain a prospectus for Vanguard Intermediate-Term Tax-Exempt Fund and Vanguard California Intermediate-Term Tax-Exempt Fund, please call 800-662-7447.