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The Muni Rally Shines Spotlight on These ETFs

BY | ETF Database
9:00 am ET 11/26/25 | 16 VIEWS
As 2025 winds down, a rocky beginning for municipal bonds is giving way to a smoother ride to the finish. In the latest iteration of its Active Fixed Income Perspectives, Vanguard noted a strong showing by municipal bonds in Q3. Given this, fixed income investors may want to position their portfolios for muni exposure if they haven’t already.An oversupply of munis due to heavy issuance to start the year has turned for the better. As the rate-cutting cycle ensues through Q4 and into next year, municipal bonds can offer investors a combination of yield and strong credit fundamentals. Heavier demand in Q3 saw munis outperform broad bond indexes. “The municipal bond market enjoyed a rally in the third quarter, outperforming the Bloomberg US Aggregate Index,” the report said. “Yields moved lower across the curve, but longer maturities delivered the best returns due to higher duration. The key feature of this market remains a historically steep curve with highly attractive long-end valuations and richer pricing in the short end.” Here are a few solutions to consider for muni exposure by way of Vanguard’s low-cost ETFs.Indexed and Active SolutionsFor a low-cost passive solution at three basis points, consider using the Vanguard Tax-Exempt Bond ETF (VTEB ). The fund tracks the Standard & Poor’s National AMT-Free Municipal Bond Index, which measures the performance of the investment-grade segment of the U.S. municipal bond market. This index includes municipal bonds from issuers that are primarily state or local governments or agencies whose interests are exempt from U.S. federal income taxes and the federal alternative minimum tax (AMT). Active fixed income strategies continue to grow in popularity. When looking for an active muni fund, the Vanguard Core Tax-Exempt Bond ETF (VCRM ) would be an ideal choice. With a 12-basis point expense ratio, it’s also a cost-effective solution. The fund taps into the portfolio management capabilities of the Vanguard Fixed Income Group. For added flexibility during times of volatility or to capture upside in certain debt issues, the managers can adjust the holdings of the fund accordingly to suit the current market environment.Reach for Higher YieldsThe newest addition to the Vanguard fixed income roster is the Vanguard High-Yield Active ETF (VGHY). Like VCRM, the fund is actively managed, which allows its portfolio managers to navigate the nuances and complexities of the high yield muni market. VGHY is competitively priced with a 0.22% expense ratio. VGHY also taps into the expertise and experience of the Vanguard Fixed Income Group. These are just three options picked from the complete roster of Vanguard’s tax-exempt ETF offerings. View the full roster to see which funds can slot into a portfolio given an investors’ fixed income needs. For more news, information, and analysis, visit the Fixed Income Content Hub.

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