New York tax-free municipal bonds generated first-quarter gains, outpacing the Barclays Municipal Bond Index but narrowly lagging taxable bonds as measured by the Barclays U.S. Aggregate Bond Index. Munis followed Treasury bond prices higher, as longer-term interest rates declined amid slowing U.S. economic growth, low inflation, attractive yields relative to sovereign debt in developed non-U.S. countries, and a belief that the Federal Reserve will not raise short-term interest rates hastily or rapidly. In the muni market, lower-quality and longer-maturity bonds outperformed higher-quality and shorter-maturity issues, respectively, as investors continued to seek attractive yields in the ongoing low-rate environment.
The New York Tax-Free Bond Fund returned 1.10% in the quarter compared with 1.06% for the Lipper New York Municipal Debt Funds Average. For the 12 months ended March 31, 2015, the fund returned 7.74% versus 7.49% for the Lipper New York Municipal Debt Funds Average. The fund's average annual total returns were 7.74%, 5.13%, and 4.59% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.50% as of its fiscal year ended February 28, 2014.
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We continue to favor revenue over general obligation bonds, reflecting our longer-term concern that many state and local governments will face fiscal challenges related to pension and health care liabilities. The education, transportation, health care, and special tax sectors continue to be our largest allocations. In the quarter, we very modestly increased our exposure to education and prerefunded bonds, but we slightly decreased exposure to special tax. We have little or no exposure to troubled Puerto Rico bonds. We decreased the fund's exposure to AAA rated and increased our substantial exposure to A rated holdings, as well as BBB and BB bonds.
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, there could be hurdles later in 2015. With the Fed preparing to tighten monetary policy, we are mindful that rising rates would likely weaken the appetite for bonds with higher interest rate risk. In our view, many states deserve high credit ratings and will be able to continue servicing their debts; however, we have longer-term concerns about significant funding shortfalls for pensions and other post-employment benefit obligations in some jurisdictions. 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. As always, we focus on finding attractively valued bonds issued by municipalities with good long-term fundamentals, which is an investment strategy that we believe will continue to serve our investors well.