Bear Stearns High Yield Index finishes week to Aug. 17 showing 5.15% year-to-date return

By Paul A. Harris

St. Louis, Aug. 18 - The Bear Stearns High Yield Index has returned 5.15% for the year to Aug. 17.

The yield to worst was 8.56%. The yield-to-worst spread was 371 basis points.

For the month to Aug. 17 the index has returned 0.99%.

With the Bear Stearns index total return for the year now well above 5%, Prospect News extended another invitation to Bear Stearns corporate credit strategist Michael Reiner to revise his strategy team's forecast of a 6% total return for 2006.

Once again Reiner declined the invitation, adding that the return projection of 6% implies a 35 basis point widening by year-end.

With sources around the market forecasting a large buildup to the high-yield new issue calendar following the coming Labor Day break, possibly setting up a sell-off in high yield, Prospect News also asked Reiner for some historical perspective on the post-Labor Day junk market.

"September has historically been a tough month for the Bear Stearns index, most likely due to the calendar buildup over the summer," the strategist replied in a Friday e-mail message.

"Last September the Bear Stearns index was down over 1% for the month. The index has experienced a loss in September for four out of the last nine years."

Meanwhile, for the month to Aug. 17, all 12 of the Bear Stearns index industry sectors generated positive returns.

The month-to-date outperformer has been the consumer cyclical sector, which has returned 1.39%. Its year-to-date return is 8.75%, rendering the consumer cyclical sector the year-to-date Bear Stearns index outperformer as well.

That sector's automobile manufacturing-related component led the advance by returning 2.39% thus far in August, rendering it the month-to-date outperformer among the subsectors.

The automobile manufacturing-related subsector's 14.93% year-to-date return is third-best among the subsectors for 2006 to Aug. 17. It trails only the airlines component of the transportation sector, with a year-to-date return of 22.89%, and the long distance component of the telecommunications sector, with a year-to-date return of 15.09% but down 0.69% for the month.

The automobile manufacturing-related subsector represents a whopping 14.51% of the Bear Stearns index composite, compared to long distance, which represents only 0.60% of the composite, and airlines, which makes up only 0.09%.

Transportation is the underperforming sector for the month to Aug. 17, having returned 0.28% during that time to extend its year-to-date return to 7.98%.

Health care remains the year-to-date underperformer among industry sectors at negative 1.86% for the year to date - the only sector posting a negative return on the year so far. However, thus far in August health care has advanced 0.96%.

To Aug. 17, the index had a market value of $569.58 billion, and the issue count stood at 1,653 issues.

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