VTEB: A Low-Cost Tax-Exempt Fund Retaining Appeal With Intermediate Duration

The Vanguard Tax-Exempt Bond ETF (VTEB) charges an expense ratio of 0.05%, among the lowest in the municipal bond space. The fund's intermediate duration, around five to six years, positions it away from the extremes of the curve. Short-term muni yields have compressed, while longer-dated funds carry more rate sensitivity. VTEB's tax-exempt income is attractive for investors in higher brackets, especially with federal rates staying elevated. The portfolio holds mostly investment-grade bonds, with a weighted average maturity that avoids the steepest parts of the yield curve. That positioning has helped the fund hold up better than many peers during the recent rate moves. For those seeking a core muni holding, VTEB's combination of low cost and intermediate duration gives it a steady role. The fund has drawn inflows year-to-date, reflecting demand for tax-efficient income without taking on credit risk. The next test for VTEB will be the Fed's rate path, which directly affects the relative value of tax-exempt versus taxable bonds.