Record demand and new launches have helped to define a banner year for fixed income in 2025. With 2026 around the corner, it's an ideal time to explore the best ways to maximize fixed income exposure as the Fed continues easing monetary policy.
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.
Lauded for their yield, credit quality, and of course, their federal tax-free income, municipal bond benefits are also extending into the containment of tariff contagion. A pair of funds that income investors should consider are the Vanguard Tax-Exempt Bond ETF (VTEB) and the Vanguard Core Tax-Exempt Bond ETF (VCRM).
VCRM invests in high-quality muni bonds with a 3.6% tax-advantaged yield. After-tax income for the fund might be attractive for some investors. It compares unfavorably to some of its peers, especially BOXX.
The tax exempt status of municipal bonds could be in jeopardy as Congress mulls over whether to tax the income from these debt issues. In the meantime, Vanguard has eight ETFs to contemplate when looking to attain muni exposure.
“Show me the munis” has been a common refrain in the fixed income markets as of late. With municipal bond issuance continuing to reach elevated levels, here's an active option investors need to know about: the Vanguard Core Tax-Exempt Bond ETF (VCRM).
Investing in the Vanguard Core Tax-Exempt Bond ETF offers federal tax-exempt income and capital appreciation, providing a stable and attractive yield. VCRM's 6.8-year average duration mitigates interest rate sensitivity, offering a reliable income stream with moderate price and income fluctuations. Vanguard's expertise and low expense ratio of 0.12% make VCRM a cost-effective and prudent choice for conservative investors.