Bear Stearns Index posts best return in four years, up 5.41%

By Paul Deckelman

New York, Jan. 3 - The Bear Stearns high yield index ended 2001 up 5.41%, the biggest advance in four years. The strong performance came despite an easing of 0.15% in December, ending the index's two-month rebound from the lows the market gauge hit in the weeks immediately after the Sept. 11 terrorist attacks.

After September's terrorist attacks on New York and Washington, the index took a nosedive, along with most other financial market measures, but had bounced back after that, gaining 2.46% in October and 3.74% in November. Bear Stearns said that in the final month of the year, bonds "were likely pressured after November's rally, the recent sell-off in Treasuries and a relatively heavy few weeks of new issuance prior to the holidays."

As of Dec. 31, the index tracked 1,442 issues having a total market value of $311.788 billion, well up from the 1,388 issues worth $295.788 billion seen at the end of November. Bear Stearns sees the index as a reliable barometer of overall high yield market trends.

The yield-to-worst narrowed to 12.84% in December from 12.91% at the end of November, while the spread over Treasuries likewise plunged to 846 basis points at year-end from 883 basis points a month earlier. The considerable spread tightening and the reduction in the yield-to-worst in a month in which the index itself was slightly negative was a reflection of the substantially larger downturn in the Treasuries market in December.

For the year as a whole, telecommunications, to nobody's surprise, was far and away the absolute worst of the 11 broad sectors into which Bear Stearns divides the index, plummeting 29.55%. Telecom performed so badly in 2001 - while making up a sizable 10.51% chunk of the index - that Bear Stearns calculated that without it, the index (up 5.41% for the year overall) would have been up 13.63%. The sector's full-year returns were especially dragged down by the sharp losses suffered by two of its component sub-sectors - broadband and internet access companies, down the most of any of the index sub-sectors at 76.12%, and long-distance, which lost 50.82% on the year. A third really big loser among the telecoms in 2001 was the paging and messaging sub-sector, which had lost 89.92% of its value through the end of October, when Bear Stearns dropped the group from the index after the last paging bonds it tracked defaulted.

On the upside, long-time leader consumer non-cyclicals finished the year on top, even though its 1.22% loss for December caused the final return to narrow slightly to 28.69% from 30.28% in November. The sector's rise was powered by an 85.38% jump in the value of convenience and drug retailers' bonds since the beginning of the year. But strong as that was, it was not the top finisher among the sub-sectors. The media sector's motion picture exhibition group spurted ahead in December - up 5.71% for the month -to bring down the curtain on 2001 with a stellar 97.83% return for the year. The cinema companies got a magical boost from such end-of-the year boffo box office hits as "Lord of The Rings" and "Harry Potter." That helped the theater sub-sector - currently in the midst of extensive consolidation and restructuring, both in and out of court - to bounce back from its terrible showing in 2000, when it lost over 63% on the year.

During the month of December, seven out of the 11 broad market sectors into which Bear Stearns divides its index were in positive territory, although this represented an erosion from November, when the gainers scored a clean sweep.

The top performing broad sector for the month was the finance sector, which returned 1.96%, aided by an index-best 5.90% rise in one of its component sub-sectors, other finance.

In November, telecommunications had led the way with a jump of 8.03%, helped by double-digit returns in two of its component sub-sectors - ESMR and PCS wireless companies, up an index-best 14.10%, and long distance carriers, with a 10.47% return on the month.

But in December, telecommunications - which had been the worst performer in most of the year's individual months - reverted back to form, losing 3.07%, although this was not the worst showing. That dubious distinction was suffered by utility issues, which swooned 4.50% on the month, presumably in response to the Enron Corp. debacle and the impact which its meltdown had on a number of independent power-producing companies. In November, energy companies had turned in the weakest showing, gaining a paltry 1.14% while all of the other sectors were up considerably more.

Among the narrow sub-sectors, telecom's long-distance component lost an Index-worst 8.08% in December, quite a comedown from its powerful performance in November. International cable operators had been the worst performers in November, losing 14.38%.

End

© 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.