Bear Stearns High Yield Index returns 0.54% for month to Dec. 14, now 10.99% year-to-date

By Paul A. Harris

St. Louis, Dec. 8 - The Bear Stearns High Yield Index returned 0.54% for the month to Dec. 14, ending the period with a 10.99% year-to-date return.

That year-to-date return is off by 18 basis points from the 11.17% return that was reported on Dec. 7.

During the most recent week, the yield to worst widened by 8 bps to 7.92% and the yield-to-worst spread tightened by 4 bps to 330 bps.

In spite of the decline during the most recent period, all 12 industry sectors continued to post positive returns thus far in December.

The health care sector maintained its position as the index outperformer and returned 1.22%, a 0.15% increase over the most recent week, thus advancing its year-to-date return to 4.23%.

However, that return rendered health care the underperformer among all 12 index industry sectors for 2006 to Dec. 14.

Health care's comparatively poor year-to-date performance can in large part be laid at the feet of its diagnostic services component, which had the dubious distinction of being the year-to-date underperformer among all index subsectors at negative 12.37%. However, for the month to Dec. 14, diagnostic services was actually the outperformer among all the subsectors in the index, having returned 3.52% during that period.

The underperformer among the subsectors for the month thus far was the automobile manufacturing-related component of the consumer cyclical sector at negative 0.36%.

According to Bear Stearns corporate credit strategist Michael Reiner, massive new issuance in the auto sector pulled the rest of the index down.

"For the week, autos were the worst performer, selling off approximately 1% as Ford, Ford Motor Credit and GMAC brought nearly $9 billion in new issues to market," Reiner wrote in a Friday e-mail message.

"Also putting pressure on the auto space were concerns over GMAC's exposure to the sub-prime lending market and year-end profit taking, with the auto index up over 21% for the year.

"Ex-autos, the total return on the index for the week was virtually unchanged."

The negative return trimmed the automobile manufacturing-related subsector's year-to-date performance to 21.61%, which is still third-best in the index.

The recent weak performance of its automobile manufacturing-related component also caused the consumer cyclical sector to be the underperformer among the 12 industry sectors for the month, with a return of 0.12% during that period, leaving its year-to-date return at 14.83%.

That return left the consumer cyclical sector with a solid lead as the year-to-date outperformer among the sectors.

Its nearest competitor was the telecommunication sector, with an 11.51% year-to-date return, having gained 0.76% during the month to Dec. 14.

Telecommunication's long distance component remained in second place among the index subsectors for the year to date with a 23.47% return, having advanced 1.14% thus far in December.

Meanwhile, transportation's airlines sector maintained the pole position, having returned 36.21% for the year to Dec. 14.

On Dec. 14, the index had a market value of $609.81 billion, and the issue count stood at 1,639.

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