WisdomTree launches two laddered municipal bond ETFs

WisdomTree has launched two active laddered municipal bond ETFs: the WisdomTree Core Laddered Municipal Fund (WTMU) and the WisdomTree High Income Laddered Municipal Fund (WTMY). The firms say the ETFs were introduced to capture current entry yields and structural opportunities in the municipal market.

The funds are managed in partnership with Insight Investment. Each uses a laddered maturity structure divided into maturity “rungs,” with active security selection inside those rungs. Managers can sell individual bonds that appear overpriced within a rung and replace them with cheaper opportunities, rather than holding a fixed set of bonds.

WisdomTree and Insight say taxable‑equivalent yields on high‑quality municipal bonds have risen to roughly 7% to 9%, a level they describe as the highest in about a decade for such credits. The firms also note that, on a tax‑adjusted basis, those yields often exceed the current yield on the U.S. corporate high‑yield index while municipal default rates have historically been lower than corporate high yield.

Jeffrey Burger, senior portfolio manager at Insight, described the taxable‑equivalent levels as “upward seven, eight, nine percent type taxable equivalent yields,” and said he had not seen similar yields on high‑quality municipal credits in at least ten years.

Kevin Flanagan, head of investment and fixed income strategy at WisdomTree, pointed to higher long‑term Treasury yields and recent inflation readings as context for the launches. He noted the 10‑year Treasury approaching the mid‑4% range and the 30‑year Treasury at its highest level since 2007, and cited geopolitical tensions that have affected inflation and energy prices.

Two structural features are central to the funds’ design, according to the managers. First, the municipal yield curve is unusually steep, which can produce price gains as longer‑dated bonds ‘‘roll down’’ toward shorter maturities and are repriced at lower yields. Second, managers expect a possible medium‑term flattening of the broader yield curve, a scenario they say would favor intermediate and intermediate‑to‑longer dated muni holdings.

WTMU focuses on investment‑grade municipal credits with intermediate maturity rungs extending to about 15 years. WTMY seeks higher income and may include non‑investment‑grade holdings; it permits up to 50% of assets in below‑investment‑grade bonds while aiming to keep a substantial portion of holdings in higher‑rated credits. Expense ratios are 0.25% for WTMU and 0.35% for WTMY. Reported effective durations are about 4.7 years for WTMU and 6.4 years for WTMY.

Burger described the active process inside maturity rungs: “If we have a bond that is sitting in 2029 and we think it’s absolutely outperformed relative to its credit worthiness, we simply will sell that security and buy one that we think is cheaper,” a method the team uses to pursue relative‑value gains.

WisdomTree and Insight say the ETFs are intended for wealth managers and longer‑term investors seeking tax‑efficient income through municipal exposure amid a higher‑for‑longer interest rate environment and upcoming changes in Federal Reserve leadership.