B of A High Yield Large-Cap Index up 0.40% in week; YTD gain grows to 1.69%

By Paul Deckelman

New York, Jan. 29 - The Banc of America High Yield Large Cap Index got back on the winning track, returning 0.40% in the week ended Jan. 24. That contrasts with the 0.95% loss seen the week before, which had halted a string of three consecutive positive returns since the start of the year.

The index's year-to-date gain widened to 1.69% from 1.28% the week before.

In the most recent week, the index's spread over Treasuries narrowed to 858 basis points from 874 basis points the week before, while its yield-to-worst declined slightly to 13.10% from 13.13% the week before. In 2001, the index, which lost about 3% overall, posted a spread at year's end of over 900 basis points and a yield-to-worst of over 13.50%.

In the most recent week, the index tracked 360 issues with a total market valuation of $149.154 billion, up from 359 issues worth $148.118 billion in the week ended Jan. 17. Banc of America sees the index, which tracks issues of $300 million and over, as a reliable barometer of trends in the overall high yield market of around $600 billion.

The best performer among the three credit tiers into which B of A divides its index was the lowest tier - bonds rated B- and below (24.59% of the index) returned 0.61%. Next was the middle tier (issues rated BB-, B+ and B, comprising 55.59% of the index), which was up 0.40%. The smallest gain was seen in the top tier - issues rated BB+ and BB (19.81% of the index), which inched up 0.15%.

The latest week's index activity was highlighted by the sharp turnaround in a quartet of communications issues, which had been among the worst performers the previous week.

One of them was the best-performing industry sector in the most recent week, the international cable operators, which returned 3.78% on the strength of gains in NTL Communications and United Pan-Europe Communications, which firmed on investor expectations that both debt-laden Eurocablers are likely to undergo restructuring in the near future. In the previous week, the international cable group had lost 5.79%, putting it near the top of the Bottom Five list of the worst-performing industry groups. Lodging had meanwhile been the best performer in the Jan. 17 week, with a 1.83% gain.

International wireless telecommunications companies were the second-strongest performers in the most recent week, up 1.99% as Millicom International Cellular's zero-coupon/13.5% notes due 2006 firmed two points. The international wireless sector had lost 2.73% the week before to earn a spot in the Bottom Five.

Publishing (up 1.65% on a five-point gain in Mail-Well, Inc.'s 8.75% notes due 2008), PCS/cellular operators (up 1.52%) and domestic wireline telecoms (up 1.44%) rounded out the week's list of the Top Five best performing issues. It was the second straight week in the Top Five for publishing, which had returned 1.73% the week before to earn a spot; PCS/cellular companies and the domestic wirelines, however, had spent the week before in the Bottom Five, after having posted negative returns of 5.80% and 6.66%, respectively - the latter being the worst single sector in the index that week.

On the downside in the latest week, technology issues had an index-worst 1.91% loss, on a five-to-six-point loss seen in Marconi plc debt, after Standard & Poor's lowered the British telecommunications equipment maker's senior unsecured rating to B from B+ previously. As already noted, the domestic wireline telecom group's 6.66% negative return was the previous week's worst finish. Consumer non-cyclical issues suffered a 1.25% loss, as Rite Aid Corp.'s 7.125% notes due 2007 backtracked nearly nine points on negative investor sentiment.

Chemicals (down 0.64% on weakness in Lyondell Chemical Co.'s bonds), consumer non-durable goods (off 0.54%) and health care (down 0.19%) rounded out the latest week's Bottom Five list of the worst performing sector; the consumer non-durables had been among the best finishers the week before, when the sector gained 1.76%.

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