Many professional money managers recommend that nervous investors ease their way back into the markets through investment grade corporate bonds. U.S. Treasury bonds captured hundreds of billions of dollars last fall as skittish investors figured that at the least Uncle Sam was good for his debts. But with the 10-year Treasury bond yielding just 2.65 percent, some smart investors think there s a much better deal out there now: lending to healthy U.S. companies by buying corporate bonds. Indeed, while investment-grade yields have receded a bit from their historic highs of last fall, they re still attractive relative to Treasurys, experts say.

Behind the deals is a stark and scary reality. The financial crisis has spooked even the savviest investors. Fearing the economy will get worse, some go for safety even if the cost is minuscule yields on their money in government bonds. That means there s more interest in selling than buying even quality corporate bonds, creating what to some looks like a once-in-a-generation opportunity. Of course, corporate bond prices have fallen far, and volatility isn t likely to go away. But long-term investors needn t sweat the ups and downs. Barring the very rare default, investors in highly rated corporate debt will get their principal back when the bond matures. Until then they can enjoy yields of 7 percent or more, which experts say more than compensates for the extra risk over Treasurys. In fact, some think bond returns will rival stock returns over the next year or two. Bonds are the new stocks, says James Sarni, managing principal at Payden & Rygel, a Los Angeles based investment firm.

If the bond bulls are right, investors may earn equity-like returns for considerably less risk. While stock investors are part owners of a company, bond buyers are the creditors. Since 1920 the default rate on investment-grade bonds hasn t topped 1.6 percent, and that was in 1938. To be sure, if the economic slowdown deepens, defaults could rival this Depression-era high. But today s yields are more fear-induced anomaly than an indicator of future double-digit defaults, says Ron Tamayo, a principal with Moisand Fitzgerald Tamayo, a financial-planning firm in Maitland, Fla.

Individual bonds allow investors to reap the full advantage of today s high yields. Taxable bond mutual funds, which yield an average of 6.4 percent, never mature, so their value is more dependent on the day-to-day price fluctuations of their holdings. Lew Altfest, a financial planner in New York City, has been moving clients out of bond mutual funds and into individual bonds to take advantage of today s yields. That said, investors more comfortable with fund investing can opt for the likes of Dodge & Cox Income (DODIX) . Mutual funds are also a good option for investors without at least $50,000 to invest across several individual bonds for diversification.

Investors will have to do their homework when selecting individual bonds. Since the broker s fees are often built in to the bond price, investors must compare several brokers offerings to get a sense of where a bond is trading. Also pay attention to the bond s credit rating, its duration and the overall health of the company and sector. In addition, some bonds have call options that allow the bond issuer to redeem the bonds before they mature. Callable bonds paying higher yields might not last to maturity.

Most advisers agree that it s usually best to stick to maturities of 10 years or less, but Altfest considered an exception for a long-term Verizon bond with a 10 percent yield, figuring the high yield would compensate for the added inflationary risk. High-grade corporate yields are locked in, he says, unless we have a revolution.

Bond Buys

These corporate bonds offer decent yields and get high ratings from Standard & Poor's.

Dominion Resources ()
8.875% coupon, due 2019
Yield to maturity: 7.9%
Rating: A-
The performance of utility companies is less tethered to market cycles because of their steady cash flow. Investors seeking shelter from the financial storm have grabbed stalwarts like Richmond, Va. based Dominion Resources, one of the country s largest energy producers.

PepsiCo ()
5.0% coupon, due 2018
Yield to maturity: 4.7%
Rating: A+
This maker of soft drinks, Frito-Lay chips and other drinks and snacks posted double-digit revenue growth last year on its recession-resistant products. Analysts expect the company to post higher earnings this year, despite the difficult economy.

Prudential Financial ()
6.45% coupon, due 2021
Yield to maturity: 7.4%
Rating: A+
The government takeover of insurance giant AIG cast a pall over the industry and contributed to plunging share prices. But analysts expect Prudential, which manages some $600 billion in assets, to post higher earnings this year good news for stock and bond holders alike.

Verizon New York ()
7.375% coupon, due 2032
Yield to maturity: 7.7%
Rating: A
This long-term bond has a generous yield, which helps compensate for the risk of inflation eating away at purchasing power over the next couple of decades. Experts say this provider of traditional phone and wireless services, a unit of Verizon Communications, has solid credit and a strong position in the marketplace.