Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

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Topic Author
undid
Posts: 33
Joined: Tue Mar 12, 2019 11:35 am

Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by undid »

Hello fellow Bogleheads,

I have an investment in a mix of VWIUX/VWLUX (intermediate and long-term non-AMT muni bonds), which are mutual funds. I've been eyeing switching some of the allocation (or new incoming money) to VTEB instead as ETF vs. mutual fund has some conveniences that come with it.

However, there is one thing that has held me back and that I can't quite understand, so I thought I'd ask the experts: why is the distribution yield/distributions on VTEB so much lower than on VWIUX/VWLUX? They have a slightly different mix, but the difference is shocking - ~1.90%-2.1% on VWIUX and ~1.60%-1.80% for VTEB.

If one looks at the Vanguard's website for YTM, they look almost the same across the board:

- VWLUX: 4.4%
- VWIUX: 4.0%
- VTEB: 4.1%

But if you compute the real distribution yields with an annualized trailing average, you can an extremely different picture:

- VWLUX: 2.6%-2.75%
- VWIUX: 1.8%-2.15%
- VTEB: 1.6%-1.8%

For simplification, this ignores the EOY cap gains for the mutual funds, which would make their distributions even higher and further away from VTEB, so I don't see taking the cap gains into account helping in understanding why the distribution yields are so far apart.

At first, I thought maybe that's because the ETF doesn't make cap gain distributions and its price is driven up instead, but comparing their price over the past 5Y I don't personally see VTEB's price significantly deviating upwards over time like one would expect if its distributions were instead built into a higher price.

Any experts can enlighten me? :)

Data tables:

Code: Select all

VTEB								
Type	$/Share	Payable date	Record date	Ex-dividend date	Distribution yield	Price on record date	Distribution yield computed	Trailing total/avg, annualized
Dividend	$0.093200	11/04/2022	11/02/2022	11/01/2022	—	$47.76	2.34%	1.77%
Dividend	$0.098000	10/06/2022	10/04/2022	10/03/2022	—	$48.58	2.42%	1.74%
Dividend	$0.093100	09/07/2022	09/02/2022	09/01/2022	—	$49.56	2.25%	1.71%
Dividend	$0.087000	08/04/2022	08/02/2022	08/01/2022	—	$51.06	2.04%	1.67%
Dividend	$0.081300	07/07/2022	07/05/2022	07/01/2022	—	$50.18	1.94%	1.65%
Dividend	$0.076000	06/06/2022	06/02/2022	06/01/2022	—	$50.84	1.79%	1.63%
Dividend	$0.070400	05/05/2022	05/03/2022	05/02/2022	—	$49.91	1.69%	1.62%
Dividend	$0.068200	04/06/2022	04/04/2022	04/01/2022	—	$51.51	1.59%	1.61%
Dividend	$0.079800	03/04/2022	03/02/2022	03/01/2022	—	$53.13	1.80%	1.62%
Dividend	$0.070300	02/04/2022	02/02/2022	02/01/2022	—	$53.68	1.57%	1.60%
Dividend	$0.069400	12/29/2021	12/27/2021	12/23/2021	—	$54.96	1.52%	1.60%
Dividend	$0.074500	12/06/2021	12/02/2021	12/01/2021	—	$54.92	1.63%	1.61%
Dividend	$0.071500	11/04/2021	11/02/2021	11/01/2021	—	$54.60	1.57%	1.61%
Dividend	$0.074900	10/06/2021	10/04/2021	10/01/2021	—	$54.68	1.64%	1.62%
Dividend	$0.072100	09/07/2021	09/02/2021	09/01/2021	—	$55.18	1.57%	1.61%
Dividend	$0.071600	08/05/2021	08/03/2021	08/02/2021	—	$55.49	1.55%	1.62%
Dividend	$0.074700	07/07/2021	07/02/2021	07/01/2021	—	$55.27	1.62%	1.64%
Dividend	$0.074000	06/04/2021	06/02/2021	06/01/2021	—	$55.13	1.61%	1.65%
Dividend	$0.077800	05/06/2021	05/04/2021	05/03/2021	—	$54.94	1.70%	1.70%
								
VWIUX								
Type	$/Share	Payable date	Record date	Reinvest date	Reinvest price	Price on record date	Distribution yield computed	Trailing total/avg, annualized
Dividend	$0.0294110	11/01/2022	10/31/2022	10/31/2022	$12.87	$12.87	2.74%	2.28%
Dividend	$0.0291340	10/03/2022	09/30/2022	09/30/2022	$12.96	$12.96	2.70%	2.26%
Dividend	$0.0284880	09/01/2022	08/31/2022	08/31/2022	$13.41	$13.41	2.55%	2.23%
Dividend	$0.0279540	08/01/2022	07/29/2022	07/29/2022	$13.70	$13.70	2.45%	2.21%
Dividend	$0.0283520	07/01/2022	06/30/2022	06/30/2022	$13.41	$13.41	2.54%	2.19%
Dividend	$0.0274570	06/01/2022	05/31/2022	05/31/2022	$13.62	$13.62	2.42%	2.17%
Dividend	$0.0272070	05/02/2022	04/29/2022	04/29/2022	$13.47	$13.47	2.42%	2.15%
Dividend	$0.0258140	04/01/2022	03/31/2022	03/31/2022	$13.83	$13.83	2.24%	2.13%
Dividend	$0.0270950	03/01/2022	02/28/2022	02/28/2022	$14.24	$14.24	2.28%	2.12%
Dividend	$0.0247750	02/01/2022	01/31/2022	01/31/2022	$14.32	$14.32	2.08%	2.10%
Dividend	$0.0252250	01/03/2022	12/31/2021	12/31/2021	$14.70	$14.70	2.06%	2.10%
Dividend	$0.0259010	12/01/2021	11/30/2021	11/30/2021	$14.73	$14.73	2.11%	2.11%
Dividend	$0.0255200	11/01/2021	10/29/2021	10/29/2021	$14.66	$14.66	2.09%	2.11%
Dividend	$0.0261100	10/01/2021	09/30/2021	09/30/2021	$14.71	$14.71	2.13%	2.11%
Dividend	$0.0254760	09/01/2021	08/31/2021	08/31/2021	$14.84	$14.84	2.06%	2.11%
Dividend	$0.0257340	08/02/2021	07/30/2021	07/30/2021	$14.90	$14.90	2.07%	2.12%
Dividend	$0.0266620	07/01/2021	06/30/2021	06/30/2021	$14.83	$14.83	2.16%	2.15%
Dividend	$0.0264040	06/01/2021	05/28/2021	05/28/2021	$14.83	$14.83	2.14%	2.14%
								
VWLUX								
Type	$/Share	Payable date	Record date	Reinvest date	Reinvest price	Price on record date	Distribution yield computed	Trailing total/avg, annualized
Dividend	$0.0270330	11/01/2022	10/31/2022	10/31/2022	$10.04	$10.04	3.23%	2.74%
Dividend	$0.0266790	10/03/2022	09/30/2022	09/30/2022	$10.17	$10.17	3.15%	2.72%
Dividend	$0.0262410	09/01/2022	08/31/2022	08/31/2022	$10.65	$10.65	2.96%	2.69%
Dividend	$0.0259460	08/01/2022	07/29/2022	07/29/2022	$10.98	$10.98	2.84%	2.68%
Dividend	$0.0262570	07/01/2022	06/30/2022	06/30/2022	$10.67	$10.67	2.95%	2.67%
Dividend	$0.0259320	06/01/2022	05/31/2022	05/31/2022	$10.98	$10.98	2.83%	2.65%
Dividend	$0.0260650	05/02/2022	04/29/2022	04/29/2022	$10.83	$10.83	2.89%	2.63%
Dividend	$0.0257370	04/01/2022	03/31/2022	03/31/2022	$11.25	$11.25	2.75%	2.61%
Dividend	$0.0264860	03/01/2022	02/28/2022	02/28/2022	$11.67	$11.67	2.72%	2.60%
Dividend	$0.0252450	02/01/2022	01/31/2022	01/31/2022	$11.77	$11.77	2.57%	2.59%
Dividend	$0.0258380	01/03/2022	12/31/2021	12/31/2021	$12.13	$12.13	2.56%	2.59%
Dividend	$0.0263490	12/01/2021	11/30/2021	11/30/2021	$12.20	$12.20	2.59%	2.59%
Dividend	$0.0260720	11/01/2021	10/29/2021	10/29/2021	$12.10	$12.10	2.59%	2.59%
Dividend	$0.0263790	10/01/2021	09/30/2021	09/30/2021	$12.14	$12.14	2.61%	2.59%
Dividend	$0.0261830	09/01/2021	08/31/2021	08/31/2021	$12.27	$12.27	2.56%	2.59%
Dividend	$0.0263930	08/02/2021	07/30/2021	07/30/2021	$12.35	$12.35	2.56%	2.60%
Dividend	$0.0267770	07/01/2021	06/30/2021	06/30/2021	$12.27	$12.27	2.62%	2.62%
Dividend	$0.0267190	06/01/2021	05/28/2021	05/28/2021	$12.25	$12.25	2.62%	2.62%
Formulas for the columns:

Code: Select all

VTEB								
Type	$/Share	Payable date	Record date	Ex-dividend date	Distribution yield	Price on record date	Distribution yield computed	Trailing total/avg, annualized
Dividend	$0.093200	11/04/2022	11/02/2022	11/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D3), 2, 2)	=B3/G3*12	=SUM(B3:B$21)/AVERAGE(G3:G$21)*12/COUNT(B3:B$21)
Dividend	$0.098000	10/06/2022	10/04/2022	10/03/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D4), 2, 2)	=B4/G4*12	=SUM(B4:B$21)/AVERAGE(G4:G$21)*12/COUNT(B4:B$21)
Dividend	$0.093100	09/07/2022	09/02/2022	09/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D5), 2, 2)	=B5/G5*12	=SUM(B5:B$21)/AVERAGE(G5:G$21)*12/COUNT(B5:B$21)
Dividend	$0.087000	08/04/2022	08/02/2022	08/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D6), 2, 2)	=B6/G6*12	=SUM(B6:B$21)/AVERAGE(G6:G$21)*12/COUNT(B6:B$21)
Dividend	$0.081300	07/07/2022	07/05/2022	07/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D7), 2, 2)	=B7/G7*12	=SUM(B7:B$21)/AVERAGE(G7:G$21)*12/COUNT(B7:B$21)
Dividend	$0.076000	06/06/2022	06/02/2022	06/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D8), 2, 2)	=B8/G8*12	=SUM(B8:B$21)/AVERAGE(G8:G$21)*12/COUNT(B8:B$21)
Dividend	$0.070400	05/05/2022	05/03/2022	05/02/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D9), 2, 2)	=B9/G9*12	=SUM(B9:B$21)/AVERAGE(G9:G$21)*12/COUNT(B9:B$21)
Dividend	$0.068200	04/06/2022	04/04/2022	04/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D10), 2, 2)	=B10/G10*12	=SUM(B10:B$21)/AVERAGE(G10:G$21)*12/COUNT(B10:B$21)
Dividend	$0.079800	03/04/2022	03/02/2022	03/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D11), 2, 2)	=B11/G11*12	=SUM(B11:B$21)/AVERAGE(G11:G$21)*12/COUNT(B11:B$21)
Dividend	$0.070300	02/04/2022	02/02/2022	02/01/2022	—	=INDEX(GOOGLEFINANCE($A$1, "close", D12), 2, 2)	=B12/G12*12	=SUM(B12:B$21)/AVERAGE(G12:G$21)*12/COUNT(B12:B$21)
Dividend	$0.069400	12/29/2021	12/27/2021	12/23/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D13), 2, 2)	=B13/G13*12	=SUM(B13:B$21)/AVERAGE(G13:G$21)*12/COUNT(B13:B$21)
Dividend	$0.074500	12/06/2021	12/02/2021	12/01/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D14), 2, 2)	=B14/G14*12	=SUM(B14:B$21)/AVERAGE(G14:G$21)*12/COUNT(B14:B$21)
Dividend	$0.071500	11/04/2021	11/02/2021	11/01/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D15), 2, 2)	=B15/G15*12	=SUM(B15:B$21)/AVERAGE(G15:G$21)*12/COUNT(B15:B$21)
Dividend	$0.074900	10/06/2021	10/04/2021	10/01/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D16), 2, 2)	=B16/G16*12	=SUM(B16:B$21)/AVERAGE(G16:G$21)*12/COUNT(B16:B$21)
Dividend	$0.072100	09/07/2021	09/02/2021	09/01/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D17), 2, 2)	=B17/G17*12	=SUM(B17:B$21)/AVERAGE(G17:G$21)*12/COUNT(B17:B$21)
Dividend	$0.071600	08/05/2021	08/03/2021	08/02/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D18), 2, 2)	=B18/G18*12	=SUM(B18:B$21)/AVERAGE(G18:G$21)*12/COUNT(B18:B$21)
Dividend	$0.074700	07/07/2021	07/02/2021	07/01/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D19), 2, 2)	=B19/G19*12	=SUM(B19:B$21)/AVERAGE(G19:G$21)*12/COUNT(B19:B$21)
Dividend	$0.074000	06/04/2021	06/02/2021	06/01/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D20), 2, 2)	=B20/G20*12	=SUM(B20:B$21)/AVERAGE(G20:G$21)*12/COUNT(B20:B$21)
Dividend	$0.077800	05/06/2021	05/04/2021	05/03/2021	—	=INDEX(GOOGLEFINANCE($A$1, "close", D21), 2, 2)	=B21/G21*12	=SUM(B21:B$21)/AVERAGE(G21:G$21)*12/COUNT(B21:B$21)
								
VWIUX								
Type	$/Share	Payable date	Record date	Reinvest date	Reinvest price	Price on record date	Distribution yield computed	Trailing total/avg, annualized
Dividend	$0.0294110	11/01/2022	10/31/2022	10/31/2022	$12.87	=INDEX(GOOGLEFINANCE($A$23, "close", D25), 2, 2)	=B25/G25*12	=SUM(B25:B$42)/AVERAGE(G25:G$42)*12/COUNT(B25:B$42)
Dividend	$0.0291340	10/03/2022	09/30/2022	09/30/2022	$12.96	=INDEX(GOOGLEFINANCE($A$23, "close", D26), 2, 2)	=B26/G26*12	=SUM(B26:B$42)/AVERAGE(G26:G$42)*12/COUNT(B26:B$42)
Dividend	$0.0284880	09/01/2022	08/31/2022	08/31/2022	$13.41	=INDEX(GOOGLEFINANCE($A$23, "close", D27), 2, 2)	=B27/G27*12	=SUM(B27:B$42)/AVERAGE(G27:G$42)*12/COUNT(B27:B$42)
Dividend	$0.0279540	08/01/2022	07/29/2022	07/29/2022	$13.70	=INDEX(GOOGLEFINANCE($A$23, "close", D28), 2, 2)	=B28/G28*12	=SUM(B28:B$42)/AVERAGE(G28:G$42)*12/COUNT(B28:B$42)
Dividend	$0.0283520	07/01/2022	06/30/2022	06/30/2022	$13.41	=INDEX(GOOGLEFINANCE($A$23, "close", D29), 2, 2)	=B29/G29*12	=SUM(B29:B$42)/AVERAGE(G29:G$42)*12/COUNT(B29:B$42)
Dividend	$0.0274570	06/01/2022	05/31/2022	05/31/2022	$13.62	=INDEX(GOOGLEFINANCE($A$23, "close", D30), 2, 2)	=B30/G30*12	=SUM(B30:B$42)/AVERAGE(G30:G$42)*12/COUNT(B30:B$42)
Dividend	$0.0272070	05/02/2022	04/29/2022	04/29/2022	$13.47	=INDEX(GOOGLEFINANCE($A$23, "close", D31), 2, 2)	=B31/G31*12	=SUM(B31:B$42)/AVERAGE(G31:G$42)*12/COUNT(B31:B$42)
Dividend	$0.0258140	04/01/2022	03/31/2022	03/31/2022	$13.83	=INDEX(GOOGLEFINANCE($A$23, "close", D32), 2, 2)	=B32/G32*12	=SUM(B32:B$42)/AVERAGE(G32:G$42)*12/COUNT(B32:B$42)
Dividend	$0.0270950	03/01/2022	02/28/2022	02/28/2022	$14.24	=INDEX(GOOGLEFINANCE($A$23, "close", D33), 2, 2)	=B33/G33*12	=SUM(B33:B$42)/AVERAGE(G33:G$42)*12/COUNT(B33:B$42)
Dividend	$0.0247750	02/01/2022	01/31/2022	01/31/2022	$14.32	=INDEX(GOOGLEFINANCE($A$23, "close", D34), 2, 2)	=B34/G34*12	=SUM(B34:B$42)/AVERAGE(G34:G$42)*12/COUNT(B34:B$42)
Dividend	$0.0252250	01/03/2022	12/31/2021	12/31/2021	$14.70	=INDEX(GOOGLEFINANCE($A$23, "close", D35), 2, 2)	=B35/G35*12	=SUM(B35:B$42)/AVERAGE(G35:G$42)*12/COUNT(B35:B$42)
Dividend	$0.0259010	12/01/2021	11/30/2021	11/30/2021	$14.73	=INDEX(GOOGLEFINANCE($A$23, "close", D36), 2, 2)	=B36/G36*12	=SUM(B36:B$42)/AVERAGE(G36:G$42)*12/COUNT(B36:B$42)
Dividend	$0.0255200	11/01/2021	10/29/2021	10/29/2021	$14.66	=INDEX(GOOGLEFINANCE($A$23, "close", D37), 2, 2)	=B37/G37*12	=SUM(B37:B$42)/AVERAGE(G37:G$42)*12/COUNT(B37:B$42)
Dividend	$0.0261100	10/01/2021	09/30/2021	09/30/2021	$14.71	=INDEX(GOOGLEFINANCE($A$23, "close", D38), 2, 2)	=B38/G38*12	=SUM(B38:B$42)/AVERAGE(G38:G$42)*12/COUNT(B38:B$42)
Dividend	$0.0254760	09/01/2021	08/31/2021	08/31/2021	$14.84	=INDEX(GOOGLEFINANCE($A$23, "close", D39), 2, 2)	=B39/G39*12	=SUM(B39:B$42)/AVERAGE(G39:G$42)*12/COUNT(B39:B$42)
Dividend	$0.0257340	08/02/2021	07/30/2021	07/30/2021	$14.90	=INDEX(GOOGLEFINANCE($A$23, "close", D40), 2, 2)	=B40/G40*12	=SUM(B40:B$42)/AVERAGE(G40:G$42)*12/COUNT(B40:B$42)
Dividend	$0.0266620	07/01/2021	06/30/2021	06/30/2021	$14.83	=INDEX(GOOGLEFINANCE($A$23, "close", D41), 2, 2)	=B41/G41*12	=SUM(B41:B$42)/AVERAGE(G41:G$42)*12/COUNT(B41:B$42)
Dividend	$0.0264040	06/01/2021	05/28/2021	05/28/2021	$14.83	=INDEX(GOOGLEFINANCE($A$23, "close", D42), 2, 2)	=B42/G42*12	=SUM(B42:B$42)/AVERAGE(G42:G$42)*12/COUNT(B42:B$42)
								
VWLUX								
Type	$/Share	Payable date	Record date	Reinvest date	Reinvest price	Price on record date	Distribution yield computed	Trailing total/avg, annualized
Dividend	$0.0270330	11/01/2022	10/31/2022	10/31/2022	$10.04	=INDEX(GOOGLEFINANCE($A$44, "close", D46), 2, 2)	=B46/G46*12	=SUM(B46:B$63)/AVERAGE(G46:G$63)*12/COUNT(B46:B$63)
Dividend	$0.0266790	10/03/2022	09/30/2022	09/30/2022	$10.17	=INDEX(GOOGLEFINANCE($A$44, "close", D47), 2, 2)	=B47/G47*12	=SUM(B47:B$63)/AVERAGE(G47:G$63)*12/COUNT(B47:B$63)
Dividend	$0.0262410	09/01/2022	08/31/2022	08/31/2022	$10.65	=INDEX(GOOGLEFINANCE($A$44, "close", D48), 2, 2)	=B48/G48*12	=SUM(B48:B$63)/AVERAGE(G48:G$63)*12/COUNT(B48:B$63)
Dividend	$0.0259460	08/01/2022	07/29/2022	07/29/2022	$10.98	=INDEX(GOOGLEFINANCE($A$44, "close", D49), 2, 2)	=B49/G49*12	=SUM(B49:B$63)/AVERAGE(G49:G$63)*12/COUNT(B49:B$63)
Dividend	$0.0262570	07/01/2022	06/30/2022	06/30/2022	$10.67	=INDEX(GOOGLEFINANCE($A$44, "close", D50), 2, 2)	=B50/G50*12	=SUM(B50:B$63)/AVERAGE(G50:G$63)*12/COUNT(B50:B$63)
Dividend	$0.0259320	06/01/2022	05/31/2022	05/31/2022	$10.98	=INDEX(GOOGLEFINANCE($A$44, "close", D51), 2, 2)	=B51/G51*12	=SUM(B51:B$63)/AVERAGE(G51:G$63)*12/COUNT(B51:B$63)
Dividend	$0.0260650	05/02/2022	04/29/2022	04/29/2022	$10.83	=INDEX(GOOGLEFINANCE($A$44, "close", D52), 2, 2)	=B52/G52*12	=SUM(B52:B$63)/AVERAGE(G52:G$63)*12/COUNT(B52:B$63)
Dividend	$0.0257370	04/01/2022	03/31/2022	03/31/2022	$11.25	=INDEX(GOOGLEFINANCE($A$44, "close", D53), 2, 2)	=B53/G53*12	=SUM(B53:B$63)/AVERAGE(G53:G$63)*12/COUNT(B53:B$63)
Dividend	$0.0264860	03/01/2022	02/28/2022	02/28/2022	$11.67	=INDEX(GOOGLEFINANCE($A$44, "close", D54), 2, 2)	=B54/G54*12	=SUM(B54:B$63)/AVERAGE(G54:G$63)*12/COUNT(B54:B$63)
Dividend	$0.0252450	02/01/2022	01/31/2022	01/31/2022	$11.77	=INDEX(GOOGLEFINANCE($A$44, "close", D55), 2, 2)	=B55/G55*12	=SUM(B55:B$63)/AVERAGE(G55:G$63)*12/COUNT(B55:B$63)
Dividend	$0.0258380	01/03/2022	12/31/2021	12/31/2021	$12.13	=INDEX(GOOGLEFINANCE($A$44, "close", D56), 2, 2)	=B56/G56*12	=SUM(B56:B$63)/AVERAGE(G56:G$63)*12/COUNT(B56:B$63)
Dividend	$0.0263490	12/01/2021	11/30/2021	11/30/2021	$12.20	=INDEX(GOOGLEFINANCE($A$44, "close", D57), 2, 2)	=B57/G57*12	=SUM(B57:B$63)/AVERAGE(G57:G$63)*12/COUNT(B57:B$63)
Dividend	$0.0260720	11/01/2021	10/29/2021	10/29/2021	$12.10	=INDEX(GOOGLEFINANCE($A$44, "close", D58), 2, 2)	=B58/G58*12	=SUM(B58:B$63)/AVERAGE(G58:G$63)*12/COUNT(B58:B$63)
Dividend	$0.0263790	10/01/2021	09/30/2021	09/30/2021	$12.14	=INDEX(GOOGLEFINANCE($A$44, "close", D59), 2, 2)	=B59/G59*12	=SUM(B59:B$63)/AVERAGE(G59:G$63)*12/COUNT(B59:B$63)
Dividend	$0.0261830	09/01/2021	08/31/2021	08/31/2021	$12.27	=INDEX(GOOGLEFINANCE($A$44, "close", D60), 2, 2)	=B60/G60*12	=SUM(B60:B$63)/AVERAGE(G60:G$63)*12/COUNT(B60:B$63)
Dividend	$0.0263930	08/02/2021	07/30/2021	07/30/2021	$12.35	=INDEX(GOOGLEFINANCE($A$44, "close", D61), 2, 2)	=B61/G61*12	=SUM(B61:B$63)/AVERAGE(G61:G$63)*12/COUNT(B61:B$63)
Dividend	$0.0267770	07/01/2021	06/30/2021	06/30/2021	$12.27	=INDEX(GOOGLEFINANCE($A$44, "close", D62), 2, 2)	=B62/G62*12	=SUM(B62:B$63)/AVERAGE(G62:G$63)*12/COUNT(B62:B$63)
Dividend	$0.0267190	06/01/2021	05/28/2021	05/28/2021	$12.25	=INDEX(GOOGLEFINANCE($A$44, "close", D63), 2, 2)	=B63/G63*12	=SUM(B63:B$63)/AVERAGE(G63:G$63)*12/COUNT(B63:B$63)
PS: As a side-note, I personally can't reproduce the distribution yields shown for VWLUX or VWIUX on the Vanguard's website. `$-per-share / price-on-record-date * 12` gives different results from their computation. Close, but different.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by sycamore »

I don't know, but what about the fact that VWIUX and VWLUX declare dividends daily whereas VTEB declares them monthly? The effect is that you wouldn't see the share price change due to dividend distribution for the former, but you would for the latter. Not sure if explains the distribution yield difference you're seeing... maybe the price you're using for the denominator is wrong?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by undid »

sycamore wrote: Tue Nov 29, 2022 3:47 pm I don't know, but what about the fact that VWIUX and VWLUX declare dividends daily whereas VTEB declares them monthly?
I'm not sure how that works actually, because the actual distribution isn't done daily, it's done monthly.

Or are you saying that it goes like "for the mutual fund, the dividend is declared daily which then triggers daily adjustments to the share price, even though the actual distribution happens once a month"?

How would that even work? O_o
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by sycamore »

undid wrote: Tue Nov 29, 2022 4:46 pm
sycamore wrote: Tue Nov 29, 2022 3:47 pm I don't know, but what about the fact that VWIUX and VWLUX declare dividends daily whereas VTEB declares them monthly?
I'm not sure how that works actually, because the actual distribution isn't done daily, it's done monthly.

Or are you saying that it goes like "for the mutual fund, the dividend is declared daily which then triggers daily adjustments to the share price, even though the actual distribution happens once a month"?

How would that even work? O_o
That sounds vaguely correct but I'm not an accountant. How about...
- The fund receives interest payments on its bond holdings on a particular day. The payments are added to the fund's assets.
- The fund subtracts out expenses and determines/declares the dividend rate. It calculates what it owes to the shareholders. The total amount owed is added to the fund's debits, which has the effect of lowering the fund's Net Asset Value. It may be small, so small that it's lost amid the bond price changes for a day.
- When the dividends are paid out once a month, the amount is removed from both the asset and the debit side of the ledger, so no change in the Net Asset Value.

Maybe someone with actual knowledge of fund account will be around to explain things :)
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by stlutz »

Distribution yields are based on what the YTM of the bonds in the portfolio were *at the time the fund acquired them*

So, basically the mutual funds purchased more of the bonds in their portfolio when interest rates were higher than has the ETF.

You'll even see this in the Treasury space. If a long-term treasury fund was just launched this year during a time of "high" rates, its distribution yield will be a lot higher than a fund that's been around for 15 years.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by undid »

stlutz wrote: Fri Dec 02, 2022 8:15 pm Distribution yields are based on what the YTM of the bonds in the portfolio were *at the time the fund acquired them*

So, basically the mutual funds purchased more of the bonds in their portfolio when interest rates were higher than has the ETF.

You'll even see this in the Treasury space. If a long-term treasury fund was just launched this year during a time of "high" rates, its distribution yield will be a lot higher than a fund that's been around for 15 years.
Hum... I don't think that's correct? The distribution yield is supposed to be computed from actual distributions. The YTM isn't part of the formula. Do you have any source related to what you're describing?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by undid »

sycamore wrote: Fri Dec 02, 2022 7:56 pm
undid wrote: Tue Nov 29, 2022 4:46 pm
sycamore wrote: Tue Nov 29, 2022 3:47 pm I don't know, but what about the fact that VWIUX and VWLUX declare dividends daily whereas VTEB declares them monthly?
I'm not sure how that works actually, because the actual distribution isn't done daily, it's done monthly.

Or are you saying that it goes like "for the mutual fund, the dividend is declared daily which then triggers daily adjustments to the share price, even though the actual distribution happens once a month"?

How would that even work? O_o
That sounds vaguely correct but I'm not an accountant. How about...
- The fund receives interest payments on its bond holdings on a particular day. The payments are added to the fund's assets.
- The fund subtracts out expenses and determines/declares the dividend rate. It calculates what it owes to the shareholders. The total amount owed is added to the fund's debits, which has the effect of lowering the fund's Net Asset Value. It may be small, so small that it's lost amid the bond price changes for a day.
- When the dividends are paid out once a month, the amount is removed from both the asset and the debit side of the ledger, so no change in the Net Asset Value.

Maybe someone with actual knowledge of fund account will be around to explain things :)
That actually sounds plausible. I have never dived into how NAV was supposed to be calculated for a mutual fund, much less a bond fund.

That said, if this was the reason for the discrepancy, when we do the trailing sum over average price,al annualized, we should see this difference erased, since the ETF would see its value going down when distributing the dividend if it didn't book it to NAV on a daily basis. And in fact I'd expect it to happen right on the dividend record date so it should be represented even without a trailing sum.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by btenny »

VTEB is a muni fund based on a bond index. It holds intermediate aged bonds. It is passively managed. VTEAX is the mutual fund version of this ETF.

VWIUX is a actively managed muni fund. It has no ETF version. It has different holdings and is not the same fund as VTEB. Vanguard managers buy and sell bonds in VWIUX to maximize returns. It has better distribution yield than VTEB now due to this management. It also has better total returns YTD and for past five years than VTEB.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

undid wrote: Fri Dec 02, 2022 11:33 pm
stlutz wrote: Fri Dec 02, 2022 8:15 pm Distribution yields are based on what the YTM of the bonds in the portfolio were *at the time the fund acquired them*

So, basically the mutual funds purchased more of the bonds in their portfolio when interest rates were higher than has the ETF.

You'll even see this in the Treasury space. If a long-term treasury fund was just launched this year during a time of "high" rates, its distribution yield will be a lot higher than a fund that's been around for 15 years.
Hum... I don't think that's correct? The distribution yield is supposed to be computed from actual distributions. The YTM isn't part of the formula. Do you have any source related to what you're describing?
The distribution yield of the fund is based on actual taxable distributions. When a bond is bought at a premium or discount, tax rules often require the premium or discount to be amortized.

For example, suppose a bond was issued for $1000 with a 3% yield, and you buy the bond one year before maturity for $1010. Without the amortization rule, you would have $30 of interest and a $10 capital loss at maturity; with the amortization of the premium, you will instead report $20 of interest and no capital loss. (There are limitations on capital gain amortization on municipal bonds; if you buy a municipal bond at more than a "de minimis" discount, you cannot amortize the discount.)

Another example of amortization is zero-coupon bonds. A zero is priced at less than its face value, but the IRS considers the entire change in value to be interest, accrued every year, rather than a capital gain when the zero matures at face value.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

undid,

It depends on what you want. All 3 are good choices. BMBIX is worth a look if you want something safer. MUB is a good muni ETF.

Given those choices, I would go with VWLUX, the long muni, because the 7.9 years average duration is almost intermediate. That may not fit your needs.

According to the distribution yield table, VWLUX paid out 3.21% on November 30th. Looking at the table, it appears as if the payouts are rising. VWLUX appears to be 88% AAA/AA/A...not bad. The last time I looked BMBIX was all AAA/AA...plus. https://investor.vanguard.com/investmen ... omposition

Why so much difference in distributions? Usually, more risk, more payout.

EDIT: When I look at muni funds and ETFs, the following are most important to me:

Expenses

Amount of AAA/AA/A holdings (L. Swedroe, in his bond book said go only with AAA/AA)

A hard look at the SEC Yield, the Yield to Maturity, and the Distribution Yield Table. Not one of the three alone tells the story of future payouts. I speculate that if you look at these three, you can project future payouts for a year or more. Many think that the SEC yield alone can do that; it can't.
Last edited by hudson on Sun Dec 04, 2022 5:59 am, edited 1 time in total.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by Florida Orange »

hudson wrote: Sat Dec 03, 2022 4:06 pm Given those choices, I would go with VWLUX, the long muni, because the 7.9 years average duration is almost intermediate.
Right. And that's the longest term muni fund Vanguard has. I don't really consider it to be a long term bond fund.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by Artsdoctor »

While you might think that comparing VTEB to VWIUX is reasonable, it is not. The former is an index fund, whereas the latter is actively managed. The VTEB has a higher average credit rating so you'd expect the coupons to be a little less (VTEB has 77% AAA/AA and the VWIUX has 61% AAA/AA). The duration of the former is 6.13 whereas the duration of the latter is 5.08, so you'd expect the latter to perform somewhat better with rising rates. Nonetheless, if you take a look at the 5-year performances of both, they're really not that far apart although VWIUX ekes out a bit more return--as it should with the above differences.

If you're able to use either/or equally, I don't see why you'd choose VTEB over VWIUX. What are the advantages you alluded to?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

Florida Orange wrote: Sat Dec 03, 2022 8:22 pm
hudson wrote: Sat Dec 03, 2022 4:06 pm Given those choices, I would go with VWLUX, the long muni, because the 7.9 years average duration is almost intermediate.
Right. And that's the longest term muni fund Vanguard has. I don't really consider it to be a long term bond fund.
The reason is that most munis are callable; the long-term bonds have a long maturity, but a shorter duration because of the probability that they will be called. This causes muni funds to lose more than indicated by the duration if rates rise, as callable bonds become less likely to be called. (The duration has already increased this year by almost three years.)

Another way to see the difference is that the Treasury yield curve is inverted, so long-term Treasury funds have lower SEC yields than shorter-term Treasury funds, while long-term muni funds have higher SEC yields than shorter-term muni funds. The callability adds to the risk of long-term munis, and thus bond traders demand a higher premium when trading them.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by abuss368 »

I once invested in the Muni Tax Exempt ETF. I too noticed the Intermediate Tax Exempt fund provided high income.

Since our goal is to build a passive income stream for retirement, we switched to the Intermediate Term Tax Exempt fund.

This has worked well.

Best.
Tony
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by Florida Orange »

grabiner wrote: Sun Dec 04, 2022 6:40 pm
Florida Orange wrote: Sat Dec 03, 2022 8:22 pm
hudson wrote: Sat Dec 03, 2022 4:06 pm Given those choices, I would go with VWLUX, the long muni, because the 7.9 years average duration is almost intermediate.
Right. And that's the longest term muni fund Vanguard has. I don't really consider it to be a long term bond fund.
The reason is that most munis are callable; the long-term bonds have a long maturity, but a shorter duration because of the probability that they will be called. This causes muni funds to lose more than indicated by the duration if rates rise, as callable bonds become less likely to be called. (The duration has already increased this year by almost three years.)

Another way to see the difference is that the Treasury yield curve is inverted, so long-term Treasury funds have lower SEC yields than shorter-term Treasury funds, while long-term muni funds have higher SEC yields than shorter-term muni funds. The callability adds to the risk of long-term munis, and thus bond traders demand a higher premium when trading them.
That makes sense. Thanks for the info.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

grabiner wrote: Sun Dec 04, 2022 6:40 pm
Florida Orange wrote: Sat Dec 03, 2022 8:22 pm
hudson wrote: Sat Dec 03, 2022 4:06 pm Given those choices, I would go with VWLUX, the long muni, because the 7.9 years average duration is almost intermediate.
Right. And that's the longest term muni fund Vanguard has. I don't really consider it to be a long term bond fund.
The reason is that most munis are callable; the long-term bonds have a long maturity, but a shorter duration because of the probability that they will be called. This causes muni funds to lose more than indicated by the duration if rates rise, as callable bonds become less likely to be called. (The duration has already increased this year by almost three years.)

Another way to see the difference is that the Treasury yield curve is inverted, so long-term Treasury funds have lower SEC yields than shorter-term Treasury funds, while long-term muni funds have higher SEC yields than shorter-term muni funds. The callability adds to the risk of long-term munis, and thus bond traders demand a higher premium when trading them.
Thanks again grabiner!
Useful information...bookmarked!
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

undid wrote: Tue Nov 29, 2022 2:14 pm At first, I thought maybe that's because the ETF doesn't make cap gain distributions and its price is driven up instead, but comparing their price over the past 5Y I don't personally see VTEB's price significantly deviating upwards over time like one would expect if its distributions were instead built into a higher price.
Is VTEB's lack of capital gains distributions due to the same methodology that allows Vanguard equity ETFs and mutual funds with ETF share classes to avoid capital gains distributions? Do other companys' muni ETFs, e.g. iShares MUB and SUB, distribute capital gains?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

Artsdoctor wrote: Sun Dec 04, 2022 6:22 pm Nonetheless, if you take a look at the 5-year performances of [VTEB and VWIUX], they're really not that far apart although VWIUX ekes out a bit more return--as it should with the above differences.
Should this performance similarity be expected to continue? The difference in distribution yield is indeed striking, as OP indicates.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

zero_coupon wrote: Wed Dec 07, 2022 2:37 am
Artsdoctor wrote: Sun Dec 04, 2022 6:22 pm Nonetheless, if you take a look at the 5-year performances of [VTEB and VWIUX], they're really not that far apart although VWIUX ekes out a bit more return--as it should with the above differences.
Should this performance similarity be expected to continue? The difference in distribution yield is indeed striking, as OP indicates.
I speculate yes. Both are good. I would own VTEB, MUB, or VWIUX interchangeably. I'd rather have Vanguard's long muni...that's not that long.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

zero_coupon wrote: Wed Dec 07, 2022 2:37 am
Artsdoctor wrote: Sun Dec 04, 2022 6:22 pm Nonetheless, if you take a look at the 5-year performances of [VTEB and VWIUX], they're really not that far apart although VWIUX ekes out a bit more return--as it should with the above differences.
Should this performance similarity be expected to continue? The difference in distribution yield is indeed striking, as OP indicates.
I would expect the distribution yields to be different even if the total returns are similar; VTEB should have higher distributions if rates are declining, and lower distributions if rates are rising.

The reason is that the dollar distribution on a bond does not change as long as a fund holds the bond. When a fund sells a bond to buy a new bond, the distributions on the new bond will correspond to current bond yields. Thus, if rates are rising, funds hold old bonds with distribution yields lower than the current SEC yield. And VTEB, which holds bonds of all maturities, can hold on to bonds for longer than VWIUX, which holds only intermediate-term bonds. VWIUX does not buy bonds when they are long-term, and sells most bonds when they become short-term. This is reflected in the lower turnover rate of VTEB (11% versus 18%).
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by sycamore »

VWIUX/VWITX is an interesting fund (I used to own it) as it doesn't strictly hold only intermediate duration bonds. From its web page https://investor.vanguard.com/investmen ... omposition:

"The fund has no limitations on the maturity of individual securities but is expected to maintain a dollar-weighted average maturity of 6 to 12 years."

Image

The fund managers have leeway to (1) vary the average duration from 6 to 12 (so could be quite different from VTEB's duration) and (2) do things like use a barbell approach of holding short + long bonds. Not saying they ever would do such a thing but the point is the fund is actively managed which could explain why the yields are different than VTEB's.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

hudson wrote: Wed Dec 07, 2022 4:27 am
zero_coupon wrote: Wed Dec 07, 2022 2:37 am
Artsdoctor wrote: Sun Dec 04, 2022 6:22 pm Nonetheless, if you take a look at the 5-year performances of [VTEB and VWIUX], they're really not that far apart although VWIUX ekes out a bit more return--as it should with the above differences.
Should this performance similarity be expected to continue? The difference in distribution yield is indeed striking, as OP indicates.
I speculate yes. Both are good. I would own VTEB, MUB, or VWIUX interchangeably. I'd rather have Vanguard's long muni...that's not that long.
That's good to know, hudson. I was concerned that VTEB was a mediocre substitute for Vanguard's actively managed bond funds. Is there an ETF that performs similar to VWLUX?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

grabiner wrote: Wed Dec 07, 2022 8:05 am I would expect the distribution yields to be different even if the total returns are similar; VTEB should have higher distributions if rates are declining, and lower distributions if rates are rising.
Interesting, thanks grabiner. Sounds like VTEB gets a double whammy when rates rise (lower NAV and lower distributions). Do you have any thougts about whether VTEB is an adequate substitute for Vanguard's active funds mentioned in the thread title?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

zero_coupon wrote: Wed Dec 07, 2022 8:32 pm That's good to know, hudson. I was concerned that VTEB was a mediocre substitute for Vanguard's actively managed bond funds. Is there an ETF that performs similar to VWLUX?
ETF.com lists two general long-term muni ETFs: SPDR Nuveen Municipal Long-Term ETF (TFI) at 0.23% expenses, and VanEck Long Muni ETF (MLN) at 0.24% expenses which has an even longer duration because it tracks an index of bonds more than 17 years from maturity.

I would still prefer the Vanguard funds at 0.09% expenses for the Admiral share class, although MLN looks attractive if you want the longer duration (currently about 10 years). In particular, MLN would be the closest to liability matching for a 30-year fixed-rate mortgage.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

zero_coupon wrote: Wed Dec 07, 2022 8:44 pm
grabiner wrote: Wed Dec 07, 2022 8:05 am I would expect the distribution yields to be different even if the total returns are similar; VTEB should have higher distributions if rates are declining, and lower distributions if rates are rising.
Interesting, thanks grabiner. Sounds like VTEB gets a double whammy when rates rise (lower NAV and lower distributions). Do you have any thougts about whether VTEB is an adequate substitute for Vanguard's active funds mentioned in the thread title?
It's not a double whammy. When rates rise, the distribution yield of VTEB will not increase as quickly as that of higher-turnover funds, but the NAV will recover more quickly, for the same total return.

Consider two funds which both hold a bond with a 3% yield worth $1000. The bond price drops to $950 as the yield rises to 4%. Fund A keeps the old bond, which distributes $30 per year (now 3.33% of the value), but the bond price recovers to $1000 when the bond matures. Fund B sells the bond and buys a new bond with a 4% yield, which distributes $36 per year, but the bond price does not rise. Investors in both funds break even after holding the bond for the duration.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

hudson wrote: Wed Dec 07, 2022 4:27 am Both [VTEB and VWIUX] are good. I would own VTEB, MUB, or VWIUX interchangeably. I'd rather have Vanguard's long muni...that's not that long.
It's interesting to look at these in portfoliovisualizer. Not considering taxation, one gets the impression that it doesn't matter too much which taxable or tax-exempt intermediate bond fund is selected, but VWLUX comes out distinctly ahead of the "intermediates." I guess that's to be expected with its longer duration in a period of generally declining rates. Obviously the tax-exempt funds are advantageous for those in the higher brackets.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

grabiner wrote: Wed Dec 07, 2022 8:47 pm
zero_coupon wrote: Wed Dec 07, 2022 8:32 pm That's good to know, hudson. I was concerned that VTEB was a mediocre substitute for Vanguard's actively managed bond funds. Is there an ETF that performs similar to VWLUX?
ETF.com lists two general long-term muni ETFs: SPDR Nuveen Municipal Long-Term ETF (TFI) at 0.23% expenses, and VanEck Long Muni ETF (MLN) at 0.24% expenses which has an even longer duration because it tracks an index of bonds more than 17 years from maturity.

I would still prefer the Vanguard funds at 0.09% expenses for the Admiral share class, although MLN looks attractive if you want the longer duration (currently about 10 years). In particular, MLN would be the closest to liability matching for a 30-year fixed-rate mortgage.
I just took a quick look at TFI. https://www.ssga.com/us/en/individual/e ... nd-etf-tfi

ER = .23...ugh (no Boglehead Merit Badge for SPDR...too much dealer profit)

SEC is 3.08; Yield to maturity is 3.44...attractive

It's all AAA/AA...nice!

Duration appears to be 7-9 years

Distributions appear to be rising. SPDR's distribution yield table didn't show the monthly payouts annualized. If I was going to buy, I guess I'd have to transfer it to a spreadsheet see if I could still do formulas. https://www.ssga.com/us/en/individual/e ... tributions (scroll down to TFI)

Bottom Line: TFI meets Larry Swedroe's AAA/AA criteria. If I was going back into munis, I'd give this a serious look.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

undid wrote: Tue Nov 29, 2022 2:14 pm If one looks at the Vanguard's website for YTM, they look almost the same across the board:

- VWLUX: 4.4%
- VWIUX: 4.0%
- VTEB: 4.1%
Can we expect the distribution yields to approach these levels? If so, when?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

zero_coupon wrote: Fri Dec 09, 2022 6:46 am
undid wrote: Tue Nov 29, 2022 2:14 pm If one looks at the Vanguard's website for YTM, they look almost the same across the board:

- VWLUX: 4.4%
- VWIUX: 4.0%
- VTEB: 4.1%
Can we expect the distribution yields to approach these levels? If so, when?
Good question!

VWIUX...I just checked
SEC 3.36%
YTM 4%
Dec. 1 annualized payout 2.76%

From the distribution yield table, the monthly payouts (annualized) appear to be rising gradually. https://investor.vanguard.com/investmen ... fltr-modal

I speculate that it will take a year or two or three. That's more of a David Grabiner question.
I speculate that the monthly payouts will move towards the SEC yield. As you know, the SEC yield is a moving target. It depends on interest rates.
It depends on the old bonds that are sold and the new ones purchased.

Bottom Line: no guarantees

Maybe 3% by June 2023?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

zero_coupon wrote: Fri Dec 09, 2022 6:46 am
undid wrote: Tue Nov 29, 2022 2:14 pm If one looks at the Vanguard's website for YTM, they look almost the same across the board:

- VWLUX: 4.4%
- VWIUX: 4.0%
- VTEB: 4.1%
Can we expect the distribution yields to approach these levels? If so, when?
When a fund buys a bond, the distributions on that bond normally match the SEC yield, Thus, if interest rates don't change, the distribution yield will move towards the SEC yield, but will match it only when all the bonds have turned over (or might incidentally match it if there is a match between old bonds with higher or lower yields).
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

grabiner wrote: Wed Dec 07, 2022 8:47 pm
zero_coupon wrote: Wed Dec 07, 2022 8:32 pm Is there an ETF that performs similar to VWLUX?
ETF.com lists two general long-term muni ETFs: SPDR Nuveen Municipal Long-Term ETF (TFI) at 0.23% expenses, and VanEck Long Muni ETF (MLN) at 0.24% expenses which has an even longer duration because it tracks an index of bonds more than 17 years from maturity.
Looking at portfoliovisualizer (data available since 2015) SPDR Nuveen Municipal Long-Term ETF (TFI) performs very similar to VTEB, and VanEck Long Muni ETF (MLN) performs very similar to VWLUX. However this changes in March/April 2022, when VTEB and VWLUX declined much less than their respective competitors. Presumably this has to do with duration, but why did the aforementioned striking similarities persist until recently? What should we make of this? Are the Vanguard funds just better?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

zero_coupon wrote: Sat Dec 10, 2022 2:34 am
grabiner wrote: Wed Dec 07, 2022 8:47 pm
zero_coupon wrote: Wed Dec 07, 2022 8:32 pm Is there an ETF that performs similar to VWLUX?
ETF.com lists two general long-term muni ETFs: SPDR Nuveen Municipal Long-Term ETF (TFI) at 0.23% expenses, and VanEck Long Muni ETF (MLN) at 0.24% expenses which has an even longer duration because it tracks an index of bonds more than 17 years from maturity.
Looking at portfoliovisualizer (data available since 2015) SPDR Nuveen Municipal Long-Term ETF (TFI) performs very similar to VTEB, and VanEck Long Muni ETF (MLN) performs very similar to VWLUX. However this changes in March/April 2022, when VTEB and VWLUX declined much less than their respective competitors. Presumably this has to do with duration, but why did the aforementioned striking similarities persist until recently? What should we make of this? Are the Vanguard funds just better?
Vanguard funds better? not better
I don't compare with portfolio visualizer type studies. I don't think it looks at what's important to me.
I just look at
amount of AAA/AA/A...the safer the better

effective duration (10 or 11 years matches my needs at 75)

the payout! I look at SEC, YTM, and distribution yield table; I squint and look at all 3, I try to project the payouts for the next year or two. (Is there a better way?)

ER (funds and ETFs with high ERs are dealer profit...yuck. Sometimes, I might hold my nose some day and go with TFI. BMBIX has a yucky ER, but I like it.)

You can't predict where the NAV or price of a fund or ETF is going. I think that you can predict the payout at least in the short term. I want payout!

When I buy, I come up with a tax loss harvest (TLH)plan and write it down. For example, I used to really like VWIUX; it's after tax payouts were sweet compared to total bond or treasury funds/ETFs. Over a year ago, it dropped below my buying price; I didn't have a plan. I missed the boat. I should have TL harvested and VWIUX's price came back strong. Then I made a plan; sell VWIUX the day it drops below my buying price. At some point VWIUX dropped and I sold it. I didn't really get any losses, and I moved to TIPS (SCHP) instead of munis.

Bottom Line: Do your homework and get a fund or ETF that matches your needs.
(and read David Grabiner posts on the inner workings of a mutual fund/ETF)
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

hudson wrote: Sat Dec 10, 2022 5:21 am Vanguard funds better? not better
I don't compare with portfolio visualizer type studies. I don't think it looks at what's important to me.
I just look at
amount of AAA/AA/A...the safer the better

effective duration (10 or 11 years matches my needs at 75)

the payout! I look at SEC, YTM, and distribution yield table; I squint and look at all 3, I try to project the payouts for the next year or two. (Is there a better way?)

ER (funds and ETFs with high ERs are dealer profit...yuck. Sometimes, I might hold my nose some day and go with TFI. BMBIX has a yucky ER, but I like it.)

You can't predict where the NAV or price of a fund or ETF is going. I think that you can predict the payout at least in the short term. I want payout!

When I buy, I come up with a tax loss harvest (TLH)plan and write it down. For example, I used to really like VWIUX; it's after tax payouts were sweet compared to total bond or treasury funds/ETFs. Over a year ago, it dropped below my buying price; I didn't have a plan. I missed the boat. I should have TL harvested and VWIUX's price came back strong. Then I made a plan; sell VWIUX the day it drops below my buying price. At some point VWIUX dropped and I sold it. I didn't really get any losses, and I moved to TIPS (SCHP) instead of munis.

Bottom Line: Do your homework and get a fund or ETF that matches your needs.
(and read David Grabiner posts on the inner workings of a mutual fund/ETF)
Great advice, hudson. But in a way, doesn't portfoliovisualizer encapsulate some of the info you mentioned? Payouts are reflected properly when you select "reinvest dividends," and the ER is reflected in the fund's value over time. Fund duration is somewhat reflected in how the fund's NAV responds to interest rate changes. I believe portfoliovisualizer can be a useful tool.

Regarding VWIUX (and VTEB, which performs somewhat similarly), why don't more people chose this (or VTEB) over BND? VTEB seems to have similar distribution levels to BND, does it not? But unlike BND, it offers tax-exempt income. Wouldn't this be a reasonable choice for most people, not just the high-bracket folks?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

zero_coupon wrote: Sat Dec 10, 2022 8:10 am
hudson wrote: Sat Dec 10, 2022 5:21 am Vanguard funds better? not better
I don't compare with portfolio visualizer type studies. I don't think it looks at what's important to me.
I just look at
amount of AAA/AA/A...the safer the better

effective duration (10 or 11 years matches my needs at 75)

the payout! I look at SEC, YTM, and distribution yield table; I squint and look at all 3, I try to project the payouts for the next year or two. (Is there a better way?)

ER (funds and ETFs with high ERs are dealer profit...yuck. Sometimes, I might hold my nose some day and go with TFI. BMBIX has a yucky ER, but I like it.)

You can't predict where the NAV or price of a fund or ETF is going. I think that you can predict the payout at least in the short term. I want payout!

When I buy, I come up with a tax loss harvest (TLH)plan and write it down. For example, I used to really like VWIUX; it's after tax payouts were sweet compared to total bond or treasury funds/ETFs. Over a year ago, it dropped below my buying price; I didn't have a plan. I missed the boat. I should have TL harvested and VWIUX's price came back strong. Then I made a plan; sell VWIUX the day it drops below my buying price. At some point VWIUX dropped and I sold it. I didn't really get any losses, and I moved to TIPS (SCHP) instead of munis.

Bottom Line: Do your homework and get a fund or ETF that matches your needs.
(and read David Grabiner posts on the inner workings of a mutual fund/ETF)
Great advice, hudson. But in a way, doesn't portfoliovisualizer encapsulate some of the info you mentioned? Payouts are reflected properly when you select "reinvest dividends," and the ER is reflected in the fund's value over time. Fund duration is somewhat reflected in how the fund's NAV responds to interest rate changes. I believe portfoliovisualizer can be a useful tool.

Regarding VWIUX (and VTEB, which performs somewhat similarly), why don't more people chose this (or VTEB) over BND? VTEB seems to have similar distribution levels to BND, does it not? But unlike BND, it offers tax-exempt income. Wouldn't this be a reasonable choice for most people, not just the high-bracket folks?
VTEB or VWIUX over BND for lower tax brackets? In general, probably not. There have been times where VWIUX could payout more than BND after taxes in one or more of the lower brackets. One has to first figure out what number to use as payouts for BND, VTEB, or VWIUX, then do the after tax math. (SEC doesn't usually work for me; it depends.) It might be best to do a separate trial tax return for each scenario.

Portfolio Visualizer? I shouldn't have commented as I've never used it.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

hudson wrote: Sat Dec 10, 2022 5:21 am the payout! I look at SEC, YTM, and distribution yield table; I squint and look at all 3, I try to project the payouts for the next year or two. (Is there a better way?)

ER (funds and ETFs with high ERs are dealer profit...yuck. Sometimes, I might hold my nose some day and go with TFI. BMBIX has a yucky ER, but I like it.)

You can't predict where the NAV or price of a fund or ETF is going. I think that you can predict the payout at least in the short term. I want payout!
This is not quite correct. While you cannot predict the future NAV of a fund or ETF, or the price of a bond (unless you hold the bond to maturity), you can predict the relative movements, and those relative movements cancel out the payout difference. If Fund A and Fund B have equal SEC yields but similar bond portfolios, and Fund A distributes 1% more than Fund B, then Fund A will have 1% lower price increase than Fund B in one year, or 1% greater decline. Thus there is no advantage of Fund A over Fund B in total return. (There may be a tax difference; you would rather get capital gains from a taxable bond fund, and rather get dividends from a muni fund.)

There is an example on the wiki: SEC yield. Bond A is at par, and Bond B is at a premium, but both have the same yield to maturity. Therefore, Bond B distributes more in coupon payments (which would be dividends if your fund holds the bond). If interest rates don't change, the price of Bond A doesn't change, while the price of Bond B declines. If interest rates rise, the price of both bonds falls, but the price of Bond B falls more. Either way, the total return of both bonds, or of funds holding them, is almost identical.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by abuss368 »

grabiner wrote: Sat Dec 10, 2022 3:11 pm
This is not quite correct. While you cannot predict the future NAV of a fund or ETF, or the price of a bond (unless you hold the bond to maturity), you can predict the relative movements, and those relative movements cancel out the payout difference. If Fund A and Fund B have equal SEC yields but similar bond portfolios, and Fund A distributes 1% more than Fund B, then Fund A will have 1% lower price increase than Fund B in one year, or 1% greater decline. Thus there is no advantage of Fund A over Fund B in total return. (There may be a tax difference; you would rather get capital gains from a taxable bond fund, and rather get dividends from a muni fund.)

There is an example on the wiki: SEC yield. Bond A is at par, and Bond B is at a premium, but both have the same yield to maturity. Therefore, Bond B distributes more in coupon payments (which would be dividends if your fund holds the bond). If interest rates don't change, the price of Bond A doesn't change, while the price of Bond B declines. If interest rates rise, the price of both bonds falls, but the price of Bond B falls more. Either way, the total return of both bonds, or of funds holding them, is almost identical.
Hi David -

This is an excellent reference and thank you for providing. I am going to check out the wiki as you noted.

Bonds can be a complex subject, but once an investor breaks down that composition into pieces, it becomes much easier to digest and understand.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

grabiner wrote: Sat Dec 10, 2022 3:11 pm
hudson wrote: Sat Dec 10, 2022 5:21 am the payout! I look at SEC, YTM, and distribution yield table; I squint and look at all 3, I try to project the payouts for the next year or two. (Is there a better way?)

ER (funds and ETFs with high ERs are dealer profit...yuck. Sometimes, I might hold my nose some day and go with TFI. BMBIX has a yucky ER, but I like it.)

You can't predict where the NAV or price of a fund or ETF is going. I think that you can predict the payout at least in the short term. I want payout!
This is not quite correct. While you cannot predict the future NAV of a fund or ETF, or the price of a bond (unless you hold the bond to maturity), you can predict the relative movements, and those relative movements cancel out the payout difference. If Fund A and Fund B have equal SEC yields but similar bond portfolios, and Fund A distributes 1% more than Fund B, then Fund A will have 1% lower price increase than Fund B in one year, or 1% greater decline. Thus there is no advantage of Fund A over Fund B in total return. (There may be a tax difference; you would rather get capital gains from a taxable bond fund, and rather get dividends from a muni fund.)

There is an example on the wiki: SEC yield. Bond A is at par, and Bond B is at a premium, but both have the same yield to maturity. Therefore, Bond B distributes more in coupon payments (which would be dividends if your fund holds the bond). If interest rates don't change, the price of Bond A doesn't change, while the price of Bond B declines. If interest rates rise, the price of both bonds falls, but the price of Bond B falls more. Either way, the total return of both bonds, or of funds holding them, is almost identical.
Thanks David!
I think you were referring to the last paragraph for "not quite correct?"
Paragraph 1: Do you know a better way to project short term returns?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by grabiner »

hudson wrote: Sun Dec 11, 2022 10:39 am
grabiner wrote: Sat Dec 10, 2022 3:11 pm
hudson wrote: Sat Dec 10, 2022 5:21 am the payout! I look at SEC, YTM, and distribution yield table; I squint and look at all 3, I try to project the payouts for the next year or two. (Is there a better way?)

ER (funds and ETFs with high ERs are dealer profit...yuck. Sometimes, I might hold my nose some day and go with TFI. BMBIX has a yucky ER, but I like it.)

You can't predict where the NAV or price of a fund or ETF is going. I think that you can predict the payout at least in the short term. I want payout!
This is not quite correct. While you cannot predict the future NAV of a fund or ETF, or the price of a bond (unless you hold the bond to maturity), you can predict the relative movements, and those relative movements cancel out the payout difference.
Thanks David!
I think you were referring to the last paragraph for "not quite correct?"
Paragraph 1: Do you know a better way to project short term returns?
There isn't a better way to project short-term returns. The 1-year return of a 1-year bond is known. The 1-year return of a 10-year bond is not known, but the expected return should be the return of a 1-year bond plus a risk premium, assuming an efficient market. The 10-year bond will earn much less than the 1-year bond if rates rise more than expected, and much more if rates fall more than expected, but it should earn slightly more if rate movements match expectations.

The current yield curve is inverted; the 1-year Treasury yields 4.72%, while the 10-year Treasury yields 3.57%. Therefore, investors who buy 10-year Treasury bonds must be expecting yields to fall. If an investor expects the 9-year yield next year to be 3.27%, then they expect a return of about 6% on the 10-year Treasury (3.57% current yield, and about 2.4% price increase from a 0.3% interest-rate decrease with an 8-year duration). This would be a fair risk premium.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

grabiner wrote: Sun Dec 11, 2022 11:47 am
hudson wrote: Sun Dec 11, 2022 10:39 am
grabiner wrote: Sat Dec 10, 2022 3:11 pm
hudson wrote: Sat Dec 10, 2022 5:21 am the payout! I look at SEC, YTM, and distribution yield table; I squint and look at all 3, I try to project the payouts for the next year or two. (Is there a better way?)

ER (funds and ETFs with high ERs are dealer profit...yuck. Sometimes, I might hold my nose some day and go with TFI. BMBIX has a yucky ER, but I like it.)

You can't predict where the NAV or price of a fund or ETF is going. I think that you can predict the payout at least in the short term. I want payout!
This is not quite correct. While you cannot predict the future NAV of a fund or ETF, or the price of a bond (unless you hold the bond to maturity), you can predict the relative movements, and those relative movements cancel out the payout difference.
Thanks David!
I think you were referring to the last paragraph for "not quite correct?"
Paragraph 1: Do you know a better way to project short term returns?
There isn't a better way to project short-term returns. The 1-year return of a 1-year bond is known. The 1-year return of a 10-year bond is not known, but the expected return should be the return of a 1-year bond plus a risk premium, assuming an efficient market. The 10-year bond will earn much less than the 1-year bond if rates rise more than expected, and much more if rates fall more than expected, but it should earn slightly more if rate movements match expectations.

The current yield curve is inverted; the 1-year Treasury yields 4.72%, while the 10-year Treasury yields 3.57%. Therefore, investors who buy 10-year Treasury bonds must be expecting yields to fall. If an investor expects the 9-year yield next year to be 3.27%, then they expect a return of about 6% on the 10-year Treasury (3.57% current yield, and about 2.4% price increase from a 0.3% interest-rate decrease with an 8-year duration). This would be a fair risk premium.
Thanks David Grabiner!
I favor predicting short term payouts.
I don't try to predict long term NAV/share price.
If the NAV rises, that's gravy.
If the NAV trends down, I'll watch it like a hawk. If the NAV goes below my purchase price, I'll decide whether or not to change horses or let it go into tax loss harvest territory.
If the payout is decent, I'll hold it.

Bottom Line: I warm up to fixed income payouts.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

undid wrote: Tue Nov 29, 2022 2:14 pm why is the distribution yield/distributions on VTEB so much lower than on VWIUX/VWLUX? ... At first, I thought maybe that's because the ETF doesn't make cap gain distributions and its price is driven up instead...
Do I understand correctly that VWIUX and VWLUX tend to (or at least occasionally) make taxable capital gains distributions, whereas VTEB does not?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by sycamore »

zero_coupon wrote: Fri Apr 07, 2023 5:58 am
undid wrote: Tue Nov 29, 2022 2:14 pm why is the distribution yield/distributions on VTEB so much lower than on VWIUX/VWLUX? ... At first, I thought maybe that's because the ETF doesn't make cap gain distributions and its price is driven up instead...
Do I understand correctly that VWIUX and VWLUX tend to (or at least occasionally) make taxable capital gains distributions, whereas VTEB does not?
The Vanguard advisors website has up to 10 years' history of each fund's distribution history.
VWIUX: https://advisors.vanguard.com/investmen ... tributions
VTEB: https://advisors.vanguard.com/investmen ... tributions

And click on the "Export distribution data" button; it generates a CSV file.

For VTEB I saw only "Income" distributions.

For VWIUX, there were STCG and LTCG distributions only in 2021, and the amounts were $0.0035/share and $0.0133/share. Trivial amounts of cap gains. So that wouldn't be the explanation.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

sycamore wrote: Fri Apr 07, 2023 7:58 am
zero_coupon wrote: Fri Apr 07, 2023 5:58 am
undid wrote: Tue Nov 29, 2022 2:14 pm why is the distribution yield/distributions on VTEB so much lower than on VWIUX/VWLUX? ... At first, I thought maybe that's because the ETF doesn't make cap gain distributions and its price is driven up instead...
Do I understand correctly that VWIUX and VWLUX tend to (or at least occasionally) make taxable capital gains distributions, whereas VTEB does not?
The Vanguard advisors website has up to 10 years' history of each fund's distribution history.
VWIUX: https://advisors.vanguard.com/investmen ... tributions
VTEB: https://advisors.vanguard.com/investmen ... tributions

And click on the "Export distribution data" button; it generates a CSV file.

For VTEB I saw only "Income" distributions.

For VWIUX, there were STCG and LTCG distributions only in 2021, and the amounts were $0.0035/share and $0.0133/share. Trivial amounts of cap gains. So that wouldn't be the explanation.
We can basically assume, then, that VWIUX will NOT make taxable distributions, as the amounts are negligible.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by beyou »

The growth of 10k charts clearly show that the muni index fund closely tracks the intermediate active fund. Wont be same because as an index fund, it owns short, intermediate and long bonds. Such a fund would differ in interest income and sometimes also differ in total performance, but over last 5 years the index and intermediate are almost the same return.

I prefer the lower er of the etf. I also prefer the index for greater diversification of maturities and higher credit ratings. I also prefer the simplicity of one fund that covers short-int-long rather then 2-3 funds that cover the same ground. To me the decision is BND vs VTEB based on your tax situation. The only way I would stray is maybe if I wanted a state specific muni fund due to high state taxes.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by zero_coupon »

beyou wrote: Sat May 20, 2023 6:32 pm To me the decision is BND vs VTEB based on your tax situation.
Any thoughts on VWLUX? That is hudson's preferred option.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

zero_coupon wrote: Mon May 22, 2023 3:03 am
beyou wrote: Sat May 20, 2023 6:32 pm To me the decision is BND vs VTEB based on your tax situation.
Any thoughts on VWLUX? That is hudson's preferred option.
I've moved to treasuries and CDs so I haven't looked at munis lately.

VWLUX...not that long...Vanguard Long-Term Tax-Exempt Fund Admiral Shares
Payout May 1: 3.2% annualized (The distribution yield table is where I look first because it's a solid number that you can take to the bank.)
Yield to maturity: 3.7%
SEC: 3.61% (that means for now the payout is trending up.)
Average Duration: 7.2 years
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by beyou »

hudson wrote: Mon May 22, 2023 4:53 am
zero_coupon wrote: Mon May 22, 2023 3:03 am
beyou wrote: Sat May 20, 2023 6:32 pm To me the decision is BND vs VTEB based on your tax situation.
Any thoughts on VWLUX? That is hudson's preferred option.
I've moved to treasuries and CDs so I haven't looked at munis lately.

Payout May 1: 3.2% annualized (The distribution yield table is where I look first because it's a solid number that you can take to the bank.)
If all that matters is a yield, then maybe you should buy “high yield” bonds/fund (aka junk bonds).
Yield you can “take to the bank” is NOT all one should focus on. HOW you get that yield, how the yield and price may behave under various economic conditions, how it is taxed, and liquidity are all important factors to understand and consider.

CDs have limited liquidity. I would only consider for very short term specific goals (liability matching). Then again, I would only use brokered CDs, not worth it to me to be moving money physicially from bank to bank, better things to do and simpler to consilidate.

Treasuries are fine in that regard, but again, there is no federal tax break. There is the highest degree of liquidity, safety of principal. And this does not really contradict what I said since I suggested one consider BND vs VTEB depending on tax situation (and comparable tax adjust yields). BND is about 2/3 Federal Gov bonds, 1/3 investment grade corporate bonds, which add some yield and diversification.
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by beyou »

zero_coupon wrote: Mon May 22, 2023 3:03 am
beyou wrote: Sat May 20, 2023 6:32 pm To me the decision is BND vs VTEB based on your tax situation.
Any thoughts on VWLUX? That is hudson's preferred option.
I prefer diversification across maturities. The OP uses both the intermediate and long term funds, not only the long term fund you ask about. In this regard I agree with OP to use both, to spread rate risk and possibly rebalance between the 2 funds over time. As rates rise, the long term fund would lose more, hence rebalance into it. When rates fall, the opposite would be true.

That said, if there was not tax exempt index fund, at lower er, already built to buy short-intermediare-long munis in a single fund, then I would consider something like VWLUX as PART of my bond portfolio, not all of it. Depending what state you live in, might be even better to buy the state specific fund instead of VWLUX, since many state specific funds are also long term funds, but still as PART of a bond portfolio. Would consider short-intermediate bond funds to compliment either VWLUX or it’s state specific equivalent, to get maturity diversity, and also credit diversity to offset too much concentration in your home state. That said, VTEB gives me all this in one package. It has a range of maturities, high % of NY and CA (to get a better tax break on a portion of your bond holdings), and lower ER. If one wants a higher % in their own state, that would be my main reason to avoid VTEB but VWLUX is an even worse solution in such case. So for me if I wanted munis due to a high tax bracket, the choices are :

VTEB (one low cost package with 20% + in my home state)

or a combination of 2-3 funds

Vanguard NY Long term tax exempt (instead of VWLUX)
Vang intermediate term tax ex VWIUX (to reduce duration and diversify credit/state)
Vang short term tax exempt (or limited term) to further reduce duration and diversify

Exact % of each is custom to your own needs for shorter and longer term goals.

If you are not in NY or CA, but let’s say MA or IL, then VTEB has so little % in your state that a state specific fund might be more compelling. If you are in a low/no income tax state, the state allocation is best as diversified as possible, in which case I would stick with VTEB unless you only want long term bonds (VWLUX) for a long term goal.

VWLUX no doubt beats VTEB in a rate declining environment, and VTEB would do better in a rate rising environment. Focus on your needs for liabilities in the future and you federal/state tax situation. While those aren’t always 100% predictable, they are more predictable than guessing direction of rates, and more meaningful to your own needs.

If one was in a lower tax bracket, you could make the same analysis to compare BND (diversified by maturity and credit) vs a combination of funds to alter the risk profile as desired (less or more credit or duration/rate risk).
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

beyou wrote: Mon May 22, 2023 6:32 am
hudson wrote: Mon May 22, 2023 4:53 am
zero_coupon wrote: Mon May 22, 2023 3:03 am
beyou wrote: Sat May 20, 2023 6:32 pm To me the decision is BND vs VTEB based on your tax situation.
Any thoughts on VWLUX? That is hudson's preferred option.
I've moved to treasuries and CDs so I haven't looked at munis lately.

Payout May 1: 3.2% annualized (The distribution yield table is where I look first because it's a solid number that you can take to the bank.)
If all that matters is a yield, then maybe you should buy “high yield” bonds/fund (aka junk bonds).
Yield you can “take to the bank” is NOT all one should focus on. HOW you get that yield, how the yield and price may behave under various economic conditions, how it is taxed, and liquidity are all important factors to understand and consider.

CDs have limited liquidity. I would only consider for very short term specific goals (liability matching). Then again, I would only use brokered CDs, not worth it to me to be moving money physicially from bank to bank, better things to do and simpler to consilidate.

Treasuries are fine in that regard, but again, there is no federal tax break. There is the highest degree of liquidity, safety of principal. And this does not really contradict what I said since I suggested one consider BND vs VTEB depending on tax situation (and comparable tax adjust yields). BND is about 2/3 Federal Gov bonds, 1/3 investment grade corporate bonds, which add some yield and diversification.
Thanks beyou!
No high yield funds or ETFs for me...
Treasuries and CDs are at the top of my list.
Next AAA/AA munis like BMBIX Baird's intermediate muni fund.
Next: The other funds and ETFs listed in this discussion: VWIUX, VWLUX, VTEB, MUB, etc.
Would I ever buy a high yield bond fund? I doubt it, but I'll leave that option open. Rick Ferri, in one of his books, wrote favorably about a high yield bond fund...if my memory is correct.

Edit: My memory is OK: viewtopic.php?p=6591508#p6591508
It seems like Rick wrote that he really liked VWIUX: Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by beyou »

hudson wrote: Mon May 22, 2023 7:12 am
beyou wrote: Mon May 22, 2023 6:32 am
hudson wrote: Mon May 22, 2023 4:53 am
zero_coupon wrote: Mon May 22, 2023 3:03 am
beyou wrote: Sat May 20, 2023 6:32 pm To me the decision is BND vs VTEB based on your tax situation.
Any thoughts on VWLUX? That is hudson's preferred option.
I've moved to treasuries and CDs so I haven't looked at munis lately.

Payout May 1: 3.2% annualized (The distribution yield table is where I look first because it's a solid number that you can take to the bank.)
If all that matters is a yield, then maybe you should buy “high yield” bonds/fund (aka junk bonds).
Yield you can “take to the bank” is NOT all one should focus on. HOW you get that yield, how the yield and price may behave under various economic conditions, how it is taxed, and liquidity are all important factors to understand and consider.

CDs have limited liquidity. I would only consider for very short term specific goals (liability matching). Then again, I would only use brokered CDs, not worth it to me to be moving money physicially from bank to bank, better things to do and simpler to consilidate.

Treasuries are fine in that regard, but again, there is no federal tax break. There is the highest degree of liquidity, safety of principal. And this does not really contradict what I said since I suggested one consider BND vs VTEB depending on tax situation (and comparable tax adjust yields). BND is about 2/3 Federal Gov bonds, 1/3 investment grade corporate bonds, which add some yield and diversification.
Thanks beyou!
No high yield funds or ETFs for me...
Treasuries and CDs are at the top of my list.
Next AAA/AA munis like BMBIX Baird's intermediate muni fund.
Next: The other funds and ETFs listed in this discussion: VWIUX, VWLUX, VTEB, MUB, etc.
Would I ever buy a high yield bond fund? I doubt it, but I'll leave that option open. Rick Ferri, in one of his books, wrote favorably about a high yield bond fund...if my memory is correct.

Edit: My memory is OK: viewtopic.php?p=6591508#p6591508
It seems like Rick wrote that he really liked VWIUX: Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares
I was not seriously proposing that high yield corp bonds are an alternative for you. Making a point, yield “that you can take to the bank” is not all you should focus on. How you earn that yield is also important. High yield bonds are IMO somewhere between your fixed income and equity allocation, meaning a bit volatile for a bond portfolio but far less than an equity portfolio. I have allocated a portion of my longer liability IRA fixed income to high yield and another portion to TIPS. Willing to take more risk in a bucket I am not planning to spend soon. My shorter liability taxable acct has munis, and savings bonds (effectively treauries), to have shorter duration and reduced credit risk for $ I plan to spend in early retirement.

If Rick Ferri recommends VWIUX then why BMBIX ?
BMBIX seems like a good fund if you really are very risk averse to get slightly lower credit risk, though you pay a reasonable but higher ER for the privilege. And the returns of BMBIX have been consistently lower than VWIUX and the index funds (vteb etc) due to both the higher er and credit rating.

If you are sticking with CD and Tsy then I suppose your tax bracket is low enough you do not need to debate the best muni funds/strategy, why bother ?
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Re: Muni bonds: VTEB vs. VWIUX/VWLUX (and why so much difference in distributions?)

Post by hudson »

Thanks beyou!
If Rick Ferri recommends VWIUX then why BMBIX ?
At one time I owned half VWIUX and half BMBIX. (both good intermediate muni funds)
VWIUX was 90% AAA/AA/A...from memory
BMBIX was 100% AAA/AA with lots of prefunded bonds...so safer
BMBIX's expense ratio did give me a little heartburn
You already said all of that.

Sometime munis pay better after tax; sometimes they don't. Treasuries are safer.
When it's a close call, I'll go with safer.

I do chase the best available payouts. I try not to hang around in short term products with long term money.
The best deal is the king.
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