Bear Stearns High Yield Index loses 0.73% on week to March 31, now negative 1.42% year do date

By Paul A. Harris

St. Louis, April 1 - The Bear Stearns High Yield Index gave up 0.73% during the week to March 31 as the index continued to plow into negative territory, ending the period with a negative 1.42% year-to-date return.

The loss follows the previous week's negative 1.17% return. The index has now reported gains in 31 of the past 42 weeks.

Bear Stearns high-yield strategist Mike Taylor pointed to the index's 375 basis point yield-to-worst spread, which was 31 basis points wider on the week, and said that issues in the index are wider by 83 basis points from the record low 292 basis points set earlier in March 2005.

Taylor also commented that there is evidence in the index to support the now widely held perception that high yield investors have undertaken a flight from risk.

"As we had expected, when volatility increases, despite the relative strong credit environment - i.e. few defaults - all C-rated issues are underperforming," Taylor said.

"We suspect that will continue with potential fallen angels and higher Treasury yields as the catalyst."

All 11 industry sectors that make up the index posted negative returns for the week to March 31.

The steepest decline came from the Consumer Cyclical sector, which lost 1.24% on the week, leaving it at negative 2.38% year to date. The sector's retailers component lost 4.93% on the week, by far the biggest loss among all of the sub-sectors in the index, leaving retail at negative 4.93% on the year.

Taylor attributed the dramatic underperformance of the retailers sub-sector to the speculation of leveraged buyout activity and the additional supply pressure it may create.

Only a handful of sub-sectors posted positive returns for the week to March 31. The banking component of the finance sector fared best with a 0.60% return on the week, leaving it with a 1.90% year-to-date return.

The finance sector now posts the strongest performance of all the industry sectors year to date at 0.73%. However it lost 0.62% during the week to March 31.

The cellular component of the telecommunication sector has rendered the best return among all the sub-sectors in the index year to date at 3.79%. However cellular gave up 0.89 on the week.

The index ended the week with a 7.91% yield to worst, 24 basis points higher than the previous week.

The index ended the week to March 31 with a market value of $545.53 billion compared to the previous week's $548.84 billion. The number of issues increased by six to 1,762 issues.

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