As tremors continue throughout credit markets, even short-term bond funds and money market funds are becoming suspect as safe havens to stash cash.

The latest scare came on Tuesday. The Schwab YieldPlus (SWYPX) ultra-short bond fund has seen its assets drop from around $13 billion in May to $2.5 billion. A report in the San Francisco Chronicle attributed that to a combination of redemptions and price losses as liquidity problems force demand for short-term issues down.

The meltdown of Bear Stearns, a big manager of bond funds and mortgage-backed securities portfolios, hasn't helped settle markets.

Against that backdrop, Standard & Poor's Ratings Service says it has given the first actively managed bond exchange-traded fund its highest quality credit ranking. And the fund, which falls somewhere between a money market and short-term bond fund in terms of duration, is also giving the Bear Stearns Current Yield ETF (AMEX: YYY) its lowest volatility grade.

"Our ratings addressed the level of protection that the fund's portfolio provides against credit defaults," said Joel Friedman, director of S&P's fund ratings and evaluations unit.

S&P analysts gave YYY a credit rating of AAAf. It's not the same as the scale used for money market funds. The "f" designation is assigned to funds with variable net asset values. "Money market funds get ratings on a totally different scale," said Friedman. "Principal stability ratings for money market-type of funds are different."

YYY uses slightly longer-term credit vehicles than money markets. But according to S&P's ratings, the securities used by YYY are at least A-1 on short-term issues. For longer-term bonds, the lowest quality holdings are A-rated or better, according to S&P.  

Looking back at past default histories of similar types of bonds held in YYY, both short term and long term, showed "a very low likelihood of default," said Michael Masih, an S&P analyst.

"The portfolio's holdings provide extremely strong protection against losses from credit defaults," he added.

Based on Bear Stearns' experience managing these types of funds through other investment vehicles, S&P determined it was "comfortable with management's experience, research capabilities and portfolio strategies," said Masih.

Bear Stearns' Short-Maturity Fixed-Income Team is overseeing YYY. That's a division of BSAM's larger fixed-income group.

"The team has historically produced incremental returns over money market funds and benchmark indices," the S&P credit report noted.

That might strike some investors as ironic considering Bear Stearns' problems in fixed-income areas lately. But Friedman said that in the case of YYY, "most of the mortgage securities are agency-backed mortgages."

He also noted that YYY's managers by mandate are "only buying the highest-quality issues."

The ETF also received an S1+ volatility rating by S&P's analysts. "We look at the total return of a fund's volatility," Masih said.

The S-1 plus rating basically indicates extremely low sensitivity to changing market conditions, added Friedman. He says that YYY's volatility characteristics should match a short-term bond fund with average duration of one year or less.

The firm, which rates more than 400 money market funds, says that such short-term investment vehicles are holding up as a group fairly well given current credit conditions. Friedman says S&P hasn't been forced to downgrade any of its AAA or higher-rated money market funds as of yet.

"And we get information on a weekly basis with money markets," he added.

On other types of fixed-income vehicles such as YYY, due to their longer-term holdings, S&P's credit analysts receive updated information on a monthly basis.

Entering 2008, BSAM managed $30.5 billion in assets. Of that amount, the fixed-income team managed $14.7 billion.