Bear Stearns High Yield Index gains 0.29% in week to May 4, now up 3.60% year to date

By Paul A. Harris

St. Louis, May 5 - The Bear Stearns High Yield Index gained 0.29% in the most recent week ended Thursday, advancing its year-to-date return to 3.60%.

The move follows the previous week's 0.15% gain.

The index has now reported gains in 66 of the past 99 weeks.

For the most recent week, the yield to worst ended tighter by 2 basis points at 8.28%.

The index's yield-to-worst spread tightened by 8 bps to 323 bps.

The yield-to-worst spread for the double-BB credit sector ended the most recent week at 261 bps, only 16 bps lower than the yield-to-worst spread for the single-B credit sector at 277 bps. However the triple-C sector ended the most recent period with a yield-to-worst spread of 584 bps, 307 bps wider than the single B sector.

Bear Stearns high-yield strategist Mike Taylor explained that because of their large weight in the Bear Stearns index, Ford Motor Co., Ford Motor Credit, and General Motors Acceptance Corp. bonds - which account for 10% of the total market weight of the composite - can greatly impact average statistics of the composite. Excluding these components and other automobile manufacturing-related issues with relatively high spreads changes the difference between the double-B sector and the single-B sector.

"Without them the gap widens to 72 bps," Taylor commented in a Friday e-mail.

"Nevertheless, this is still a tight spread," he added. "The difference tends to be closer to 200 bps."

Taylor went on to explain that while the difference between single-B and triple-C is much greater (307 bps), the 20-year historical average difference is more than 300 bps higher, at 650 bps.

"Therefore, the historical data demonstrates that some investors are still demanding higher yielding investments even if lower-rated," Taylor commented.

Meanwhile, all of the 11 industry sectors comprising the index made positive moves during the most recent week.

Transportation outperforms

The outperformer was the transportation sector, which advanced 0.80% on the week, extending its year-to-date return to 5.42%, the strongest year-to-date return among all industry sectors.

The transportation sector's airlines component led the advance by gaining 1.64% to extend its year-to-date return to 17.40%, by far the strongest year-to-date performance among all industry subsectors.

The telecommunication sector's long distance component returned 1.66%, topping airlines by two bps to post the strongest return among all subsectors for the week.

Long distance represents 0.78% of the Bear Stearns index composite, while the airlines component comprises only 0.08% of the composite.

Telecoms underperform

The telecommunication sector's slim 0.04% advance rendered it the week's underperformer among industry sectors. Its year-to-date return ended the period at 3.60%.

Among the seven subsectors to post negative returns on the week, the greatest losses were sustained by the telecommunications sector's CLECS & other local carrier component and its ESMR & PCS component. The former dropped 0.34% during the week, reducing its year-to-date return to 1.80%, while the latter gave up 0.56% to end with a 3.27% year-to-date return.

The market value of the index ended the week at $572.52 billion, down from the previous week's $574.90 billion. The number of issues decreased by four to 1,675 issues.

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