Many muni investors feared that President Donald Trump’s big plans for an infrastructure revival would inundate the market with a new supply of municipal debt issuance.
Many were also concerned that Trump’s plans to lower income taxes would weaken the appeal of tax-exempt munis and that the president’s pro-growth agenda would push the Federal Reserve to hike interest rates sooner and faster.
“As is the case with so many Vanguard ETFs, VTEB has garnered a loyal following among investors since coming to market. Assets under management of $1.2 billion confirm as much. This Vanguard bond ETF also features a massive lineup with almost 3,170 issues, 93% of which are rated AAA, AA or A,” reports InvestorPlace. “VTEB’s average duration is 5.8 years, which is not as risky as long-term bond ETFs. Longer-term risks for this Vanguard bond ETF and other municipal bond funds include potential changes to the U.S. tax code that could reduce the tax benefits of munis and deteriorating municipal balance sheets in states that are major issuers of these bonds, such as California and Illinois.”
Year-to-date, investors have allocated $603.5 million to VTEB.
For more information on the munis market, visit our municipal bonds category.