Bear Stearns High Yield Index down 0.14% in week to Nov. 10, now up 0.84% year to date

By Paul A. Harris

New York, Nov. 14 - The Bear Stearns High Yield Index dropped by 0.14% in the most recent week, lowering its year-to-date return to 0.84%.

The loss cancels out the previous week's 0.14% gain.

For the week, the index's yield-to-worst spread widened by 12 basis points to 381 basis points. The yield to worst increased five bps on the week to 8.31%.

The index now has reported gains in 49 of the past 74 weeks. Thus far in 2005, the index has posted 25 positive weekly returns versus 20 negative returns.

With a ramp-up in the year-end forward calendar said to be taking shape in the junk bond market, Prospect News asked Victor Consoli, head of corporate credit strategy for Bear Stearns, to estimate its potential size and comment on the possible impact on the index's ultimate return for 2005.

"The announced and shadow calendar is shaping up to be in the $15 billion to $20 billion range by the end of the year," Consoli replied in a Monday afternoon e-mail message.

He added that issuance at that level would see the 2005 high-yield new issue market ending in the range of $115 billion to $120 billion of issuance, compared to last year's approximately $155 billion, which is "about on track with this year's pace of about 25% behind last year.

"We think the new issues are being anticipated, and buyers are selectively waiting to deploy capital cautiously," the e-mail message continued. "We expect the new volume will help the market finish stronger than today, up in the 1.5% to 2.0% range for the year."

Six of the 11 industry sectors making up the index showed positive returns while five declined.

The capital goods-manufacturing sector and the transportation sector tied for the week's strongest performance at 0.39%.

Capital goods-manufacturing, which improved its year-to-date return to 1.55%, rallied behind its fabricated glass plastics & fiber component, which returned 1.27% on the week cutting its year-to-date losses to negative 3.87%.

The transportation sector, with its 0.39% gain on the week, cut its year-to-date losses to negative 16.13% to remain the underperforming sector of the index.

Transportation's volatile airlines component led the advance by returning 3.85% on the week to outperform all other index sub-sectors. However the airlines component remains the underperformer of the index for 2005 with a year-to-date return of negative 51.91%.

The weakest performance among industry sectors was that of the consumer cyclical sector, which dropped 0.71%, extending its year-to-date loss to negative 1.26%.

Consumer cyclical's automobile manufacturing related component created the drag by dropping 1.95% on the week, making it the week's index underperformer among sub-sectors. The automobile manufacturing related sub-sector's year-to-date return fell to negative 9.11%.

Telecommunications remained the year-to-date outperformer among industry sectors at 6.15%, gaining another 0.31% on the week.

Telecommunications' cellular category remained the strongest performer of the year at 13.71%, as it picked up 0.07% on the week to Nov. 10.

For the week, the index's yield-to-worst spread widened by 12 bps to 381 bps. The yield to worst increased five bps on the week to 8.31%.

The market value of the index fell during the week to $573.48 billion from $577.61 billion. The number of issues decreased by 15 to 1,755 issues.

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