State Street Global Advisors launched the world’s second variable rate demand obligation exchange-traded fund, a peculiar type of municipal bond fund that functions almost like a muni-market money market product.

The SPDR S&P VRDO Municipal Bond ETF (NYSEArca: VRD) debuted on Thursday, Sept. 24, on the New York Stock Exchange. It aims to track the performance of the S&P National AMT-Free Municipal VRDO Index, which holds VRDOs issued by U.S. states, local governments and agencies. The fund charges 0.20% in annual expenses.

VRD follows in the footsteps of the PowerShares VRDO Tax-Free Weekly Portfolio (NYSEArca: PVI), an ETF that launched in November 2007 providing similar exposure to the VRDO market. PVI is a surprise hit among investors, gathering close to $1 billion since its debut. PVI has seen especially strong inflows this year, gathering more than $700 million in new assets year-to-date.

VRDOs are municipal bonds that can be “put back” to their issuers at full value on a weekly basis. They often come with some form of credit enhancement as well, such as protection by a third-party bank. As such, they hold very little risk.

Some investors are concerned about the prospects for defaults in the muni bond space in the coming months and years, as falling tax revenues match up against rising service demands on the state and local level. For these investors, the short-term nature of the VRDO market may be appealing.

As of Sept. 24, PVI was paying a tax-free 30-day SEC yield of 0.84%.