Bear Stearns High Yield Index gains 0.13% on week taking year-to-date return to 10.88%

By Paul A. Harris

St. Louis, Dec. 31 - The Bear Stearns High Yield Index posted a positive return during the week to Dec. 30, moving ahead 0.13% and advancing the year-to-date return to 10.88%.

The gain follows the previous week's advance, which was also 0.13%. The index has now reported gains in 24 of the past 29 weeks.

Bear Stearns high yield analyst Mike Taylor said that the back-to-back 0.13% positive returns for the last two full weeks in December were largely coupon driven.

"You are not getting a lot of price appreciation over the past two weeks, because trading volume has been expectedly very low."

Taylor estimated that given the light trading seen in the final day of the year the Bear Stearns High Yield Index would end 2004 with an approximately 11% return.

That pales in comparison to 2003's 29% return, he pointed out. However, Taylor added, 2004 ended up being a solid year of gains.

"Anytime you do better than the average coupon it's a solid year," he said. "And we have now put together two solid back-to-back years of performance, which saw returns totaling approximately 40%, over that period.

"That follows five straight years of sub-coupon performance, where prices deteriorated resulting in earnings that were less than the average coupon."

Ten of the 11 sectors that make up the index posted positive returns for the week to Dec. 29.

The utility sector made the biggest advance during the week, up 0.34%, leaving it with a 13.17% year-to-date return. Leading the advance was its independent power producer sub-sector, up 0.62% on the week, having now posted a 13.45% year-to-date return.

The only sector to end the week with a negative return was energy - oil & gas, which gave up 0.07% during the period, leaving it with an 11.71% year-to-date return.

The biggest drain came from its exploration and production component which lost 0.10% on the week, leaving it with a 12.37% year-to-date return.

Basic materials remained the top sector for 2004 year-to-date with a 13.42% total return, having picked up 0.05% on the week.

Textile and apparel remained the number one sub-sector year-to-date at 29.32%, having gained 0.13% on the week.

The index ended the week with a 6.90% yield to worst, a single basis point higher on the week.

The yield to worst spread ended the period six basis points tighter at 328 basis points.

The index ended the week to Dec. 30 with a market value of $556.97 billion, compared to the previous week's $552.68 billion. The number of issues increased by 12 to 1,742.

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