Bear Stearns High Yield Index gains 0.33% on week, now up 2.05% year to date

By Paul A. Harris

St. Louis, July 29 - The Bear Stearns High Yield Index gained 0.33% in the week ended July 28, posting a year-to-date return of 2.05%.

The gain follows the previous week's 0.10% gain.

The index yield-to-worst spread ended unchanged at 358 basis points.

The index has now reported gains in 42 of the past 59 weeks and has had positive weekly returns in 12 of 30 weeks.

Throughout the week ended July 28, Prospect News heard color from investors and high-yield syndicate sources that lower-tier credits - CCC and B - have begun to outperform in a fashion not seen since before the ratings agencies lowered the debt of General Motors Corp. to sub-investment grade in mid-March.

Bear Stearns high-yield strategist Mike Taylor confirmed that investors' appetites for risk seem to have increased.

Once again, Prospect News invited Taylor to revise his forecast from December, when he said the high-yield market would render low single-digit returns for 2005.

And, once again, he declined to do so, citing the widely held expectation that the Federal Reserve will continue to raise short-term interest rates.

With one July session left, the index had returned 2.05% for the year. By way of comparison, total returns for the index for the seven months ended July 31, 2004 were 2.74%, according to Taylor, and in 2004, the index returned 10.9%.

Utility sector at summit

During the most recent week, 10 of the 11 industry sectors making up the index posted positive returns.

As with the previous week, the utility sector posted the highest gain on the week to July 28 at 0.62% and is up 1.38% for the year. It led all sectors the previous week with a 0.34% return.

Both utilities sub-sectors made notable gains for the present week: independent power producers advanced 0.54%, boosting its year-to-date tally to 1.10%, while the regulated component turned in an even stronger performance, returning 0.85% on the week to end with a 3.07% year-to-date return.

Among all the index sub-sectors, the pipeline component of the energy - oil & gas sector posted the greatest return on the week to July 28 with 0.99%, upping its year-to-date returns to 5.16%.

Technology posts lone loss

The only sector to lose ground on the week was Technology, which dropped 0.09%, trimming its year-to-date gains to 2.43%.

The Energy - Oil & Gas sector, which returned 0.35% on the week, pushed ahead of the relecommunications sector to take the lead among all industry sectors in the index in terms of year-to-date returns at 4.57%.

Longtime leader telecommunications dropped to second place at 4.50% for the year, having gained 0.18% on the week.

However, telecommunications' cellular component remains well ahead of all of the other index industry sub-sectors, having now returned 12.68% in 2005 so far. Cellular gained 0.66% on the week to July 28.

The index yield to worst ended the week three bps tighter at 7.63%.

The index ended the week with a market value of $543.69 billion, just slightly higher than the previous week's $543.06 billion. The number of issues fell by two to 1,721 issues.

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