Vanguard Intermediate-Term Tax-Exempt Bond ETF

VTEI

Market cap $885M

The yield curve is starting to steepen again, giving fixed income investors an opportunity to consider long-term debt again. However, if the risk of stepping too far out into the yield curve is too much to bear, consider using intermediate bond options.

Vanguard Intermediate-Term Tax-Exempt Bond ETF offers tax-efficient income from municipal bonds with low expense ratio and high diversification. VTEI has a large number of holdings, high credit quality, and focuses on 10-20 year maturities, making it a good choice for conservative investors. While VTEI is a strong option, investors should be aware of municipal bond default risk and potential vulnerability to interest rate movements.

Vanguard launched a new municipal bond ETF, the Vanguard Intermediate-Term Tax-Exempt Bond ETF.  The ETF primarily invests in fixed-rate municipal bonds with maturities between one month and twenty years. This article reviews the VTEI ETF in depth and then compares it against three competing funds with similar goals. For those who want an ETF to play it somewhat safe compared to other municipal bond strategies, then I would give VTEI my Buy rating.

Municipal bonds offer a mix of relative quality and yield. So the timing couldn't be more auspicious for exchange traded fund (ETF) provider Vanguard to debut a pair of muni-focused funds.