A decade after the triple-A failures of the subprime era, gradeinflation is back on Wall Street. This time, Moody's InvestorsService and S&P Global Ratings Inc. are cutting companies slackon mergers and acquisitions, an analysis of credit-ratings data byBloomberg News found.

Over the past year and a half, both have bumped up their ratingsby two, three or even six levels on a majority of the biggestdeals, the analysis found.

Moody's and S&P don't dispute those findings, which arebased on ratings guidelines posted on their websites. But the firmssay a by-the-numbers approach overlooks one of their most valuableassets: human judgment. Both make clear that their analysts haveleeway to nudge ratings up or down, based on a company's trackrecord and their confidence in management's commitment to reduceindebtedness.

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