Fear is overpowering greed in the $7.6 trillion U.S. corporatebond market, with investors pricing in the biggest reversal incredit quality in more than two decades as the economy falters andEurope's debt crisis worsens.

While Moody's Investors Service raised the ratings on 12investment-grade companies in August and lowered seven, relativeyields on corporate debt jumped more than half a percentage point,the third-largest increase since at least 1989, Deutsche Bank AGstrategists say. At no point in at least 22 years has thedifference between bond spreads and the ratio of upgrades todowngrades been greater, according to Deutsche Bank.

The divergence between ratings and yield spreads underscores thedivision between investors over whether the slump will provefleeting or mark the end of a rally that produced returns of 46percent on average since 2008. The bulls bet that companies, whichhave $1.91 trillion in cash and other liquid assets on theirbalance sheets, can withstand U.S. unemployment at 9 percent andgrowing headwinds from Europe.

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