Bear Stearns High Yield Index gains 28.92% in 2003, best since 1991

New York, Jan. 2 - The Bear Stearns High Yield Index gained 28.92% in 2003, the best performance since it returned 44.07% in 1991.

Notable contributions to the rise came from distressed issues, which were up 108.94%, and electric utility and pipeline issues, which rose 57.59%, according to Bear Stearns analyst Michael Taylor.

He also noted that fallen angels gained 39.29% in the year, adding that they may continue to outperform the overall index in the year to come. Although issuers downgraded to junk now make up 25% of the total index, Taylor anticipates that share to fall as he sees fewer than $40 billion of fallen angels in 2004. During the year just completed, $43 billion were added.

The big gain for 2003 marked a sharp turnaround from 2002 when the index slipped 1.00% and an improvement from five years of mediocre returns. In 2001 the index rose 5.41%, in 2000 it was down 6.81%, in 1999 it gained 2.30% and in 1998 it gained 2.08%.

While the utility group placed number one among the 11 industry sectors making up the index, the weakest performance was in consumer non-cyclicals, although it still managed a 15.04% gain in the year.

Long distance finished first among the sub-sectors, with a total return of 89.59%.

Textile and apparel was the only sub-sector to lose ground in the year, dropping 7.65%.

At the end of the year the index covered $501.14 billion market value in 1,658 issues, both substantially up from $352.22 billion in 1,525 issues at the end of 2002.

The Bear Stearns index's yield to worst ended 2003 at 7.59% and the yield-to-worst spread was 460 basis points, both much improved from 12.51% and 958 basis points, respectively, 12 months earlier.

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