Tax-free municipal bonds produced positive returns but trailed taxable bonds in the first quarter of 2016. Munis lagged a brisk rally in Treasuries stemming from global risk aversion during the first part of the quarter. Treasuries maintained their gains later in the quarter amid reduced expectations for the Federal Reserve to raise short-term interest rates in 2016. Intermediate- and long-term Treasury yields fell sharply, while municipal yields decreased to a lesser extent. In the municipal market, longer-maturity bonds outperformed shorter-maturity issues, and lower-quality securities outperformed higher-quality debt.
The Tax-Free Income Fund returned 1.58% in the quarter compared with 1.67% for the Barclays Municipal Bond Index and 1.51% for the Lipper General & Insured Municipal Debt Funds Average. For the 12 months ended March 31, 2016, the fund returned 3.53% versus 3.98% for the Barclays Municipal Bond Index and 3.49% for the Lipper General & Insured Municipal Debt Funds Average. The fund's average annual total returns were 3.53%, 6.04%, and 4.77% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.51% as of its fiscal year ended February 28, 2015.
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In general, we prefer revenue bonds to general obligation (GO) debt because they offer the relative security of specific claims on revenues versus the generic pledges of taxing power associated with GOs. As for yield curve positioning, we maintain a relative overweight in longer-maturity bonds to capture the additional yield offered on those securities. We believe this will be beneficial going forward, as we think that the Fed will remain cautious about tightening monetary policy in a low inflation and slow growth global economy. As always, we focus on finding attractively valued bonds issued by municipalities with good long-term fundamentals.
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. If the economic recovery prompts the Fed to continue raising rates, muni bond yields are likely to rise 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.