T. Rowe Price Virginia Tax-Free Bond Fund (PRVAX)
Ticker Symbol:
PRVAX
Fund Status:
Open to new Retail investors  /  Open to subsequent Retail investments
Fund Management
Fund Manager
  • Hugh D. McGuirk
  • Managed Fund Since: 02/28/1997
  • Joined Firm On 09/27/1993*
  • B.S., University of Virginia; M.B.A., Harvard Business School

* Firm refers to T. Rowe Price Associates and Affiliates
Quarterly Commentaries
as of 03/31/2016

Tax-free municipal bonds produced positive returns but trailed taxable bonds in the first quarter of 2016. Limited supply and solid demand have created a strong technical environment for munis, despite the Fed's December rate hike and the potential for additional rate increases this year. Year-over-year issuance has been declining due to a sharp drop in refinancing activity, and muni market inflows have been strong. 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 bonds. In terms of sector performance, revenue bonds outperformed state and local general obligation (GO) bonds.

The Virginia Tax-Free Bond Fund returned 1.53% in the quarter compared with 1.44% for the Lipper Virginia Municipal Debt Funds Average. For the 12 months ended March 31, 2016, the fund returned 3.83% versus 2.71% for the Lipper Virginia Municipal Debt Funds Average. The fund's average annual total returns were 3.83%, 5.62%, and 4.61% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.47% as of its fiscal year ended February 28, 2015.

For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.

Benchmark Definitions

The Virginia Tax-Free Bond Fund continued to focus on revenue sectors with a heavy emphasis on transportation and health care (mostly hospitals) debt. These bonds typically offer above-average yields. Our preference for revenue debt stems from the relative security of specific claims on revenues versus the generic pledges of taxing power associated with GO bonds. While our overall view is for eventual higher rates, we have moderated the defensive nature of our duration positioning as it became increasingly clear that the pace of Fed rate hikes in 2016 would be much slower than most had predicted. (Duration measures a portfolio's sensitivity to interest rate changes.)

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, perhaps just earning the coupon income offset somewhat by modest declines in principal values. Munis should be less susceptible to rising rates than Treasuries given their attractive tax-equivalent yields and the steady demand for tax-exempt income. Ultimately, we believe that 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.

See Glossary for additional details on all data elements.