It tracks the ICE AMT-Free Core US National Municipal Index, which holds investment-grade, tax-exempt municipal bonds from across the US. By holding state and local government bonds broadly across the intermediate maturity range, it follows the performance of the municipal bond market as a whole.

It suits investors with a heavy federal income tax burden, as well as those who want to reduce their equity weighting and seek a stable stream of interest income.

It is an ETF managed by Schwab using a passive (index-tracking) approach.

Among US dollar-denominated investment-grade municipal bonds, it holds the group of securities that excludes bonds subject to the alternative minimum tax, in line with index weights. It diversifies nationwide rather than concentrating in any particular state, and its low turnover keeps operating costs light.

• One of the lowest fee structures in the industry
• Nationwide diversification that eases fiscal risk from any single state
• Monthly distributions that provide regular cash flow

Assets under management (AUM) stand at $4.1B, and the total expense ratio is 0.03% per year.

Compared with VTEB(ETF) and MUB(ETF) in the same nationwide municipal bond category, it has the advantage on fees, though its asset base is still smaller than theirs.

Municipal bond prices move with the direction of interest rates. When rates are rising, bond prices come under pressure, and when expectations of rate cuts grow, a recovery tends to follow. Because it sits in the intermediate maturity range, it is more sensitive to interest rates than short-term bonds.

Demand for tax exemption from individual investors with high tax burdens underpins municipal bond fund flows. When tax reform discussions or state fiscal news emerge, money tends to flow into or out of the entire category.

Its strengths are low fees and tax-exempt interest, while its weaknesses are interest rate fluctuations and the limited tax benefit for Korean investors.

VTEB(ETF) and MUB(ETF), shown in the table, are large products in the same nationwide municipal bond category, ahead in asset size with fees at a similar level. JMUB(ETF) and CGMU(ETF) are actively managed and tend to carry higher fees, while CMF(ETF) concentrates on California alone. If you want shorter maturities, consider SUB. If you want more yield, consider the high-yield municipal fund HYD. Broad municipal bond products from other managers include TFI and PZA.

These are the items to review before buying this ETF. Municipal bonds differ in nature from stocks, so a sound judgment requires looking at fees, maturity range, interest rate sensitivity and the tax treatment in your country of residence together.

In a rising-rate environment, price losses can outweigh distribution income. If you are an investor to whom the tax exemption does not apply, it is better to compare after-tax returns against a regular bond ETF.

It is a solid choice for those looking to diversify into US municipal bonds at low cost. If you value size and trading conditions, consider VTEB(ETF) or MUB(ETF). If cost is your priority, consider this ETF.