Tax-free municipal bonds produced positive returns and significantly outperformed taxable bonds in the fourth quarter. In fact, munis were one of the best-performing fixed income asset classes in 2015, helped by strong demand from investors, diminishing supply in recent months, and insulation from the turmoil in some global financial markets. The continued fiscal deterioration of Puerto Rico, a major muni issuer, and the Federal Reserve's first rate increase in more than nine years had a limited impact on the broad muni market as technical factors remained supportive. Long-term municipal bonds outperformed shorter maturities as the yield curve flattened over the quarter, and lower-quality municipals generally outperformed higher-quality issues.
The Maryland Short-Term Tax-Free Bond Fund returned −0.02% in the quarter compared with 0.10% for the Lipper Short Municipal Debt Funds Average. For the 12 months ended December 31, 2015, the fund returned 0.48% versus 0.40% for the Lipper Short Municipal Debt Funds Average. The fund's average annual total returns were 0.48%, 0.79%, and 1.83% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.53% as of its fiscal year ended February 28, 2015.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
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We continue to emphasize revenue bonds, favoring the relative security of specific claims on revenues versus the generic pledges of taxing power associated with general obligation (GO) debt. Health care and education remain our two largest allocations. Approximately 60% of the portfolio is invested in securities maturing within two years, and we believe that we are well positioned to take advantage of rising rates. We have avoided exposure to the debt of Puerto Rico due to the commonwealth's fiscal troubles.
We believe that the municipal bond market remains a high-quality market that offers good opportunities for long-term investors seeking tax-free income. While fundamentals are sound overall and technical support should persist, investors should expect modest returns in 2016. Muni investors this year may just earn coupon income, possibly offset somewhat by declines in principal values. Muni bond yields are likely to rise this year along with Treasury yields, although probably not to the same extent. While higher yields typically pressure bond prices, we expect rate increases to be gradual and modest. Ultimately, we believe T. Rowe Price's independent credit research is our greatest strength and will remain an asset for our investors as we navigate the current market environment.