Tax-free municipal bonds produced positive returns and significantly outperformed taxable bonds in the fourth quarter. California municipal bonds performed in line with the broader tax-free market. 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 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 California Tax-Free Bond Fund returned 2.10% in the quarter compared with 1.98% for the Lipper California Municipal Debt Funds Average. For the 12 months ended December 31, 2015, the fund returned 3.86% versus 3.70% for the Lipper California Municipal Debt Funds Average. The fund's average annual total returns were 3.86%, 6.29%, and 4.84% 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 continue to favor revenue bonds over general obligation (GO) debt, a reflection of our longer-term concerns regarding pension liabilities. Health care, a sector that typically offers higher-than-average yields, remains a significant allocation in the fund. While we have a positive outlook for the state of California's GO debt and the state is the fund's largest guarantor, we are underweight California's local GO debt due to concerns about the longer-term fiscal challenges facing many localities. Nevertheless, credit quality in California continues to strengthen as the improving economy benefits many municipal issuers. As for yield curve positioning, we maintained an overweight relative to the benchmark in maturities of 15 years and longer to capture the additional yield offered in that segment.
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.