With market volatility still a concern and Treasury yields relatively low, State Street Global Advisors has filed to launch a new municipal bond exchange-traded fund.
The SPDR S&P Municipal VRDO ETF will track an index of variable rate demand obligations. Those are debt issues by states, local governments and other agencies which pay interest exempt from federal income taxes.
VRDO issuing volume skyrocketed last year after the collapse of the auction-rate securities market. Those types of fixed-income issues are similar to VRDOs since they each have long-term maturities but reset frequently, giving both types of securities short-term interest rate features. But VRDOs are considered more flexible since they allow put options as rates change.
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