Capitalizing on the increased interest in muni bond exchange traded funds (ETFs), State Street Global Advisors has filed for a new one of their own.
The SPDR S&P Municipal VRDO fund will track an index of variable rate demand obligations, reports Index Universe. VRDOs are debt issues by states, local governments and other agencies that pay interest exempt from federal income taxes.
Last year, VRDO issuing volume shot up after the collapse of the auction-rate securities market. Those issues are similar to VRDOs in that they have long-term maturities, but VRDOs are considered more flexible since they allow put options as rates change.
The new fund will hold VRDOs that, on average, reset weekly. The filing notes that VRDOs are generally issued with maturities ranging from 30-40 years.