Vanguard Limited Term Bond as emergency fund

[WanderALot]

Hello,

I'm looking for someplace other than a money market fund to park my cash. I was thinking about putting it in the Vanguard Limited Term fund. I know it's not FDIC insured, but it's seems relatively stable, and it's tax-exempt to boot. Since it's a short term fund, it should have lesser risk to hikes in interest rates.

I've also considered INGDirect, EE bonds and CDs, but either liquidity or low rates have me leaning towards the Vanguard fund.

Any thoughts? Especially as related to principal risk? Thanks.