New York municipal bond mutual funds seek steady income exempt from Federal and New York income tax. In order to achieve tax-free stable income, it invests in municipal debt obligations of issuers from the state. Meanwhile, municipal bonds or “munis” are debt securities issued by state and local governments to borrow money. These are preferred by investors seeking a steady stream of tax free income in a volatile market. Though munis come with lower yields compared to taxable bonds, they offer better after-tax returns for investors in high tax brackets.

Below we share with you 3 top-rated New York muni bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect the funds to outperform their peers in the future. To view the Zacks Rank and past performance of all muni bond mutual funds, investors can click here to see the complete list of muni bond funds .

Dreyfus New York Tax-Exempt Bond (DRNYX - MF report) seeks tax-exempted high current income with capital preservation. DRNYX invests a lion’s share of its assets in municipal debt securities that are believed to provide return exempted from federal, New York State and New York City income taxes. DRNYX may invest a maximum of 20% of its assets in below investment-grade securities. The Dreyfus New York Tax-Exempt Bond is a non-diversified fund and has returned 3.3% over the past one year.

DRNYX has an expense ratio of 0.70% compared to the category average of 0.87%.

Fidelity Advisor New York Municipal Income I (FEMIX - MF report) invests a large chunk of its assets in municipal securities that are rate investment grade. FEMIX invests in securities that pay interest free from federal and New York State and City personal income taxes. FEMIX invests a minimum of a quarter of its assets in municipal securities across a wide range of sectors and maturities. The Fidelity Advisor New York Municipal Income I is a non-diversified fund and has returned 3.2% over the past one year.

Mark Sommer is the fund manager of FEMIX since 2002.

Columbia New York Tax-Exempt Z (CNYZX - MF report) seeks total return through tax-exempted current income. CNYZX invests a major portion of its assets in municipal debt obligations that are expected to provide interest income free from income tax of New York individual taxes and federal income taxes, which also include the federal alternative minimum tax. CNYZX primarily focuses on acquiring investment-grade securities. The Columbia New York Tax-Exempt Z is a non-diversified fund and has returned 4% over the past one year.

As of August 2015, CNYZX held 139 issues, with 2.22% of its assets invested in Suffolk Cnty N Y Econ Dev Rev Bds 5%.