Vanguard Cancels Three Muni Bond ETFs, Cites "High Level Of Volatility"

Tyler Durden's picture

Who would have thought that all it takes for a proposed ETF to be canceled is a complete loss of faith in the underlying. Today, Vanguard has announced it has canceled plans for a short, intermediate and long-term muni ETF. "We believe that this delay is prudent given the high level of volatility in the municipal bond market, which began in November 2010 and continues today," said John Woerth, spokesman for the Valley Forge, Pennsylvania-based firm. "This volatility could impede the funds' abilities to tightly track their respective benchmarks, deliver on the funds' objectives, and meet shareholders' expectations." Well, what if shareholders expectations were to short the ETFs? It would certainly meet that particular set of expectations.

And with the freefall in various muni bonds continuing, this will likely be the end of ETF providers attempting to monetize on this latest now former bubble.

More from Reuters:

Municipal bond prices have fallen since November as the possibility of a big tax rise for rich investors who favor tax-exempt debt disappeared. Mutual funds have reported eight straight weeks of withdrawals from munis, putting added pressure on the market.

Investors have complained that some muni ETFs are not properly tracking their underlying market indexes.

Vanguard oversees about $135 billion of exchange-traded funds amid its total assets of some $1.6 trillion.

In the meantime the sea of red continues for California and New Jersey.

h/t papa swamp