Bear Stearns index up 0.59% in January, beating Treasuries, stocks

New York, Feb. 4 - The Bear Stearns High Yield Index posted a return of 0.59% in January, beating both Treasuries and equities, according to analysts at Bear Stearns & Co.

While high yield's return for the month was lower than the 1.88% average of the past 16 years, it was still a little better than the 0.45% gain on the Ryan 10-year Treasury index and clearly better than the 1.46% decline in the S&P 500 and the 0.84% drop in the Nasdaq composite.

However the analysts noted that investment-grade corporates did better than high yield, returning 0.85% in the month as measured by Lehman. They attributed the lag to a sell-off in junk bonds during the last few days of January.

Of the sectors making up the Bear Stearns index, transportation was the strongest performer in January, adding 4.63%. Weakest was telecommunications, which shed 7.45%. The only other component sector to decline during the month was utilities, which dropped 1.49%.

By narrow sub-sector, January's winner was insurance, adding 15.54%. Bottom was long distance, which returned negative 21.10%.

The Bear Stearns analysts noted that the index closed the month with an average spread of 795 basis points, 51 basis points tighter since the end of last year and the first time this measure has been below 800 basis points since May 2001. A significant component of the tightening move was several large issuers that had been trading at "sizable" spreads but were removed from the index during the month after they defaulted.

At the end of January, the index included 1,419 issues with a market value of $312.868 billion. The yield to worst was 12.35%.

Bear Stearns' analysts also noted that two large issuers were reclassified: Xerox, with $2.8 billion of debt making up 1% of the composite index, was moved to technology from business services; and Allied Waste, with $5.1 billion of debt making up 2% of the composite, went to business services from industrial products.

During the final week of the month, the Bear Stearns High Yield Index declined 0.64%, continuing a recent zigzag pattern. The index gained for the first two weeks of the year, then slipped, rose again before declining again in the most recent seven-day period.

The best performing sector for the week to Jan. 31 was finance, which gained 2.77% for a year-to-date return of 3.64%.

Moving down, telecommunications placed last, with a decline of 5.70%, helping consolidate its position as weakest sector year to date with a drop of 7.45%

By narrow sub-sector, insurance was the leader in the week to Jan. 31, rising 9.73%, taking it into first place for the month as a whole.

The same trend was at work, in the other direction, for long distance. It lost 20.41% in the week, earning it bottom place so far this year with a 21.10% decline.

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