Tax-free municipal bonds produced positive returns and significantly outperformed taxable bonds in the fourth quarter. New York municipal debt modestly lagged the broader national index for the period. 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 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 New York Tax-Free Bond Fund returned 1.74% in the quarter compared with 1.66% for the Lipper New York Municipal Debt Funds Average. For the 12 months ended December 31, 2015, the fund returned 3.68% versus 3.17% for the Lipper New York Municipal Debt Funds Average. The fund's average annual total returns were 3.68%, 5.59%, and 4.48% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.49% as of its fiscal year ended February 28, 2015.
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We favor revenue bonds over general obligation debt in light of our ongoing concerns that many municipalities will face challenges related to increased pension and retiree health care liabilities. Education and health care are significant allocations in the fund. Due to our expectations for higher short-term rates as the Fed continues to normalize monetary policy, we kept an overweight to maturities of 20 years and longer. These longer-dated bonds also provide additional yield. In keeping with our long-held view that the territory's fiscal deficits and high level of indebtedness are unsustainable, the fund has no direct exposure to Puerto Rico.
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.