Schwab launches ultra-low-cost municipal bond ETF

Schwab Asset Management has introduced the world’s most cheaply priced ETF targeting the US tax-exempt bond market.

The Schwab Municipal Bond ETF (SCMB US) has been listed on NYSE Arca with an expense ratio of just 0.03%.

John Sturiale, Head of Product Management and Innovation, Schwab Asset Management, said: “As bond yields have risen, fixed income investing is more attractive than it has been in years, making this an opportune moment to introduce a new choice for investors seeking a low-cost, straightforward approach to income, diversification, and risk management in their portfolios.

“With the launch of the Schwab Municipal Bond ETF, we at Schwab Asset Management are extending our legacy of low-cost leadership and expanding our well-established line-up of bond ETFs that can play an important role in a diversified portfolio.”

The fund is linked to the ICE AMT-Free Core US National Municipal Index which consists of fixed-rate, investment-grade, US dollar-denominated, fully tax-exempt bonds issued by states, territories, or local governments and agencies within the US. The index covers bonds from across the yield curve, selecting all those with remaining maturities greater than one year.

SCMB takes the crown of lowest-cost muni-bond ETF from the $17.3 billion Vanguard Tax-Exempt Bond ETF (VTEB US) which has an expense ratio of 0.05%, while the largest fund in the space, the $27.2bn iShares National Muni Bond ETF (MUB US), is priced at 0.07%.