Bear Stearns High Yield Index surges 1.73% for week, best weekly return since 2003

By Paul A. Harris

St. Louis, May 27 - The Bear Stearns High Yield Index (BSIX) surged ahead 1.73% during the week to May 26, trimming its year-to-date losses to negative 1.57%.

According to Bear Stearns high-yield strategist Mike Taylor, the week's move represents the best weekly gain since August 2003.

The loss follows the previous week's negative 0.39% return. The index has now reported gains in 34 of the past 50 weeks.

Thus far in 2005, the BSIX has posted 10 positive weekly returns versus 11 negative ones.

All 11 industry sectors that comprise the BSIX showed positive returns for the week.

The index's yield to worst decreased by 35 basis points to 8.22% during the week to May 26, while the yield-to-worst spread tightened by 33 bps to end at 437 bps.

Although market sources have speculated that the strength seen in high yield during the last full week of May could signal that risk aversion among investors may be ebbing, Taylor cautioned that alternative explanations are also plausible.

"The rally is evidence of short-covering and some investor comfort in risk premiums," he said. "However, year to date, most rallies have faded."

The utility sector led all others, posting a 3.25% return on the week, trimming its year-to-date loss to negative 3.68%. The sector's independent power producers shot ahead 3.84% on the week, reducing its year-to-date loss to negative 4.32%.

The transportation sector's airlines component led all other sub-sectors for the week to May 26, posting a 5.95% return. However, airlines losses year to date ended at a formidable negative 28.78%.

The only BSIX sub-sector to end the week in negative territory was the finance sector's banking component, which gave up 0.11%, trimming its year-to-date gains to 2.91%.

The finance sector itself, up just under a half-point on the week, ended the period with a negative 0.41% year-to-date return.

Despite the strong performance of the BSIX for the week, only the telecommunications sector returned to the black at 0.62% for year-to-date 2005, after posting a 1.55% return on the week.

The index ended the week with a market value of $531.96 billion, compared to $523.18 billion the previous week. The number of issues decreased by one to 1,743 issues.

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