NEW YORK (CNN/Money) - The good news is that stocks are back up near their highs of the year. The really good news is that corporate bonds have finally recovered from the pummeling they took last summer and fall.

According to Standard & Poor's investment grade and speculative grade credit indexes, corporate spreads -- the difference between corporate bond and Treasury yields -- are at their narrowest level since late last June, right before WorldCom's audit committee said it had uncovered massive fraud.

For investors in both the stock and bond arenas, the WorldCom revelations were the last straw, worse even than Enron. People began to think that U.S. bookkeeping wasn't merely a bit shady, but a sham. The recovery in corporate bonds suggests that, thanks to a tougher stance from regulators and a bit of self-policing on the company level, some degree of faith in U.S. accounting has been restored.

The better tone in corporate bonds also suggests that the business outlook really is improving. Remember, what bond investors care most about is a company's ability to pay them back what it borrowed. As a result, bond investors can be a lot pickier than stock-types when it comes to combing through company reports. The upshot? Maybe Corporate America really is getting its ducks in order, bringing down its debt loads and fixing its balance sheets.

The bad news (you knew this was coming, right?) is that an analysis by Merrill Lynch's strategy group suggests that this hasn't really been the case.

Looking at companies in the S&P Industrials (the S&P 500 minus financials, utilities and transportation companies), Merrill found that the median debt-to-equity ratio remains above 50 percent -- about as high as it's ever been. Moreover, current assets to liabilities have not been growing, as they should be if companies really are being more careful with their cash.

"We find very little improvement," said Merrill Lynch chief U.S. strategist Rich Bernstein. "There really hasn't been much balance sheet repair at all."  

-- Justin Lahart is a senior writer at CNN/Money covering markets and investing.