Bear Stearns High Yield Index drops 0.80% for week to April 14, all industry sectors post negative returns

By Paul A. Harris

St. Louis, April 15 - The Bear Stearns High Yield Index dropped 0.80% during the week to April 14, as the year-to-date return dipped further into the red, ending at negative 1.54%.

The loss follows the previous week's positive 0.69% return. The index has now reported gains in 32 of the past 44 weeks. Eight of the 15 weeks thus far into 2005 have seen positive returns in the index.

The index's yield to worst increased 55 basis points to 8.31%, while the yield-to-worst spread widened by 34 basis points to end at 400 basis points.

"That widening is the most since a 46 basis point widening for the week that ended Aug. 7, 2003," commented Bear Stearns high-yield strategist Mike Taylor.

"At 400 basis points currently - the first time since October that spreads have been at or above 400 basis points - average spreads for issues in the Bear Stearns High Yield Index are now over 100 basis points from the 292 basis points all-time low that was reached on March 11, 2005.

"Spreads were wider still by mid-Friday, on relatively low trading volume."

All 11 of the industry sectors ended in negative territory for the week, and all of them also ended the period with negative year-to-date returns.

"Selling of auto-manufacturing related issues spilled over to other industries, impacting issues in the Forest/Paper Products, Retail, Tech, and Energy sectors this week," Taylor said.

Among the industry sectors, the utilities sector was the out-and-out underperformer, dropping 1.37% on the week, ending at negative 2.58% year to date. Dragging it down was its independent power producers component, which lost 1.58% on the week, ending with a negative 2.91% year-to-date return.

Among the sub-sectors, the manufacturing related component of the consumer cyclical sector underperformed all other sub-sectors, posting a negative 3.86% return on the week to April 14, leaving it at negative 8.99% year to date.

The underperformance was attributable to continuing negative headline news from the automotive sector, Taylor said.

"There is no precedence for the amount of potential fallen angel supply that overhangs the market and is contributing to high-yield auto-suppliers' underperformance," he commented.

The finance sector became the outperformer, giving up only 0.22% on the week to end with a negative 0.35% year-to-date return. Its banking component, posting one of the very few positive returns among all sub-sectors in the index, was the outperformer at 0.13%.

The banking sub-sector ended the period with the second-strongest year-to-date return among all sub-sectors: 2.38%. It trails only telecommunications' cellular component, which has now returned 3.86% year to date. However the cellular component of the telecommunications sector has posted a negative 0.46% return for the week to April 14.

Of the industry sectors, the outperformer year to date is the telecommunications sector, now negative 0.23% for 2005 to date. It posted a 0.56% loss for the week to April 14.

The index ended the week to April 14 with a market value of $542.25 billion, compared to the previous week's $547.63 billion. The number of issues decreased by one to 1,760 issues.

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