Yields on Triple-B corporate bonds, or the lowest tier of investment-grade debt, now yield more than 7% as credit spreads versus Treasury debt sit at their widest in more than a decade.

Investment-grade bonds, still stumbling this fall, offer the best values for risk-averse fixed-income investors over the next 12 months as markets eventually stabilize and credit fears subside. Many non-financial issuers don’t need bank credit to fund operations and don’t suffer from a liquidity crunch.

But many financial firms require ongoing credit, especially amid the 14-month credit crisis whereby numerous banks have increased write-downs on mountains of non-performing subprime and other mortgage-backed losses while severely curtailing lending.

In September alone, corporate bonds have been pummeled, down almost 10% in some cases and posting their single largest monthly decline since 2001.

One of the more popular investment-grade exchange traded funds, LQD, or the iShares iBoxx Investment Grade Corporate ETF, has plunged 11% in September, pushing its effective yield up to 5.6%.

Bigger bargains beckon in closed-end funds.

Many investment-grade closed-end corporate bond funds traded on the NYSE trade at discounts exceeding 12% of net asset value with effective yields in excess of 8.5%. Some of these funds, however, use leverage to augment returns.

Credit markets will get a big boost from the Paulson bail-out plan. At some point busted credit markets, including investment-grade corporate bonds and convertible bonds, should benefit from liquidity flowing into these markets again. I would, however, continue to avoid junk bonds since the broader economy is still weakening and many more weak companies are bound to default on payments over the next six months.

You still have to time to pick and choose your investment-grade bond options. You don’t have to be the first bottom-fisher; as lending spreads eventually tighten again and other credit indicators begin to normalize later this fall, investors can start buying into these bargains. I’ll keep you posted on credit stress indicators over the next few weeks. Meanwhile, there’s no rush to start buying.