Vanguard is entering another highly competitive ETF segment with its municipal bond offering. As S&P Capital IQ notes, there are currently 32 tax-free bond ETFs on the market today, including the $4.2 billion iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB) and notable rivals such as the $1.5 billion Market Vectors High Yield Municipal Index ETF (NYSEArca: HYD).
HYD and MUB are rated marketweight by S&P Capital IQ.
The new Vanguard muni ETF will track the S&P National AMT-Free Municipal Bond Index, which “focuses on investment-grade municipal bonds across the entire yield curve,” according to S&P Capital IQ.
Not surprisingly Vanguard’s new muni ETF will offer a cost advantage with fees of just 0.12% per year, well below the average annual fee of 0.49% on municipal bond ETFs, said Vanguard, citing Lipper data.
Tom Lydon’s clients own shares of HYD.