Municipal bonds are leading the market as the best-performing closed-end funds.

Eight of the top 10 -- and 126 of the 147 -- closed-end funds with positive total returns from Jan. 30 through Feb. 27 target the municipal-bond market.

As the credit market thaws, investors who are willing to take more risk for a little more reward than holding Treasury funds have pushed up the price of municipal-bond funds in February.

Among the top 10, the best performer, Millennium India Acquisition Co. Inc. ( SMCG) , isn't a municipal bond fund. The closed-end fund rebounded 26.92% in February after devastating losses over the past year on its portfolio of Indian financial-services companies.

Of the muni funds, the top-performing closed-end fund was the Eaton Vance Insured New York Municipal Bond Fund II ( NYH), up 14.8%. The fund earns current income exempt from federal income taxes, including the alternative minimum tax and New York state personal income taxes. The fund earns income by investing primarily in high-grade New York municipal bond obligations that are insured for the timely payment of principal and interest.

Doing nearly as well at 14.5%, the Eaton Vance Insured Massachusetts Municipal Bond Fund ( MAB) targets current income not subject to the regular federal income tax, alternative minimum tax and Massachusetts personal income tax. The fund accumulates income from investments in high-grade, insured Massachusetts municipal obligations.

Another closed-end investment management company making progress recouping earlier losses, Van Kampen's Van Kampen California Value Municipal Income Trust ( VCV) gained back 12% in February. The fund's capital-preservation strategy seeks a high level of current income, exempt from federal and California income taxes. The trust invests its assets in a portfolio mostly of California municipal debt obligations rated as investment grade at the time of purchase.

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