Bear Stearns High Yield Index eases 0.05%, 354 bps yield-to-worst spread marks six-year low

New York, Nov. 12 - The Bear Stearns High Yield Index gave up 0.05% in the week to Nov. 11, leaving the year-to-date return up at 8.82%.

The loss follows the previous week's 1.09% gain. The index has now reported gains in 18 of the past 22 weeks.

Mike Taylor, high-yield analyst for Bear Stearns & Co., told Prospect News that the week's loss may be attributed to some "market sloppiness," but is more a reflection of higher interest rates. He pointed to the 10-year Treasury note, the yield for which has increased dramatically over the course of the past two weeks.

"Treasuries closed Thursday at 4.25, up 18 points in a week and up 25 points over the course of two weeks," Taylor said.

"So, in spite of negative total returns in high yield for the week, there are tighter spreads for high yield because high yield has outperformed the market."

In fact, Taylor said, the index's yield-to-worst spread, which narrowed by nine basis points on the week to end the period at 354 basis points, represents a six-year low.

"That 354 yield-to-worst spread is only about 50 basis points from the all-time low," Taylor added. "And we are already at all-time lows in terms of yields. The average yield to worst for the index is 7%."

The index's yield to worst ended the week to Nov. 11 at 7.04%, 11 basis points wider than the previous week's 6.93%.

"There's not much more room to tighten, here," Taylor said. "I think we're setting up for some type of correction if rates continue to back up."

Six of the 11 industry sectors making up the index posted negative returns on the week.

The media sector gave up the most ground, declining 0.43%. The sector's North American cable component saw the biggest drain, giving up 0.95% during the period.

Among the minority of industry sectors that posted positive numbers, the transportation sector continued to recover lost ground, advancing 2.37%during the week. It has now led the index for three consecutive weeks, narrowing its year-to-date loss to negative 4.97%. Its airlines sub-sector far outpaced all other sub-sectors in the index, gaining 5.28% for the week, leaving it negative 18.61% year to date.

Basic materials remained the top sector for 2004 to date, with a 12.28% total return. However, the sector gave up 0.21% during the most recent seven-day period.

Textile and apparel remained the number one sub-sector year to date at 26.11% after moving 0.46% higher for the week.

The index ended the week to Nov. 11 with a market value of $541.09 billion, compared to the previous week's $541.72 billion. The number of issues remained unchanged at 1,705.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.