Bear Stearns High Yield Index gives up 0.21% on week; year-to-date return at negative 0.64%

By Paul A. Harris

St. Louis, Jan. 21 - The Bear Stearns High Yield Index posted a negative return for the third consecutive week, giving up 0.21% during the week to Jan. 20 and leaving the year-to-date return at negative 0.64%.

The loss follows the previous week's 0.36% loss. The index has reported gains in 24 of the past 32 weeks.

Bear Stearns high-yield analyst Mike Taylor said the weakness in the in the index over the five sessions ending Jan. 20 was particularly evident in the lower-quality credits.

"The triple-C portion of the index is down 1.5%, underperforming double-Bs, which were down about 0.25%, and single-Bs, which were down about 0.50%," Taylor said.

"We have seen triple-C bonds underperform so far this year, and I think that is a reflection of investors not being willing to continue to take on added risk - risk which they did seem willing to take on in 2004.

"The triple-C portion is where the most volatility is likely to be experienced when there are other pressures in the market and lack of support for riskier investments."

Taylor also pointed to the automotive manufacturing-related component of the consumer cyclical sector, which was down 0.91% on the week, leaving it negative 1.02% on the year, and thus underperforming the average.

"I think the big catalyst during the past week was pressure from the weakness in the investment-grade auto sector, which spilled over into the high-yield market," he said.

In all, nine of the 11 industry sectors that make up the index posted negative returns for the week to Jan. 20.

Transportation down most for week

As with the previous week, the transportation sector saw the largest loss, giving up 1.70% during the period and ending with a negative 5.21% year-to-date return, by far the weakest performance of all the sectors year to date. Its airlines sub-sector again created the biggest drain, losing 4.63%, widening its year-to-date loss to negative 13.36%.

Meanwhile, the finance sector posted a 0.06% gain for the week, reducing its year-do-date loss to negative 0.12%. And the consumer non-cyclical sector saw a 0.02% return for the week to Jan. 20, paring its year-to-date loss to negative 0.32%.

Finance sector outperforms

All 11 industry sectors that comprise the index ended the week to Jan. 20 with their year-to-date returns in the red. The narrowest loss was that of the finance sector, which has given up 0.12%, while the transportation sector has seen the biggest drain, as mentioned.

Among the minority of industry sub-sectors that have seen positive year-to-date returns, the cellular component of the telecommunications sector leads. It is now 2.49% in the black, having gained 0.03% on the week. Meanwhile, the ESMR & PCS sub-sector of the telecommunications sector gained the most ground among sub-sectors during the week to Jan. 20, with a 0.21% return.

"There are still pockets of support," said Taylor. "The cellular and PCS components have done pretty well so far this year. That is a reflection of industry trends and further mergers and acquisitions activity."

The index ended the week with a 7.18% yield to worst, 10 points higher on the week.

The yield-to-worst spread ended the period 10 basis points wider at 353 basis points.

The index ended the week to Jan. 20 with a market value of $548.12 billion, compared to the previous week's $551.34 billion. The number of issues increased by five to 1,739 issues.

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