B of A High Yield Large-Cap Index up 0.92%; year's loss narrows to 3.41%

By Paul Deckelman

New York, Dec. 23 - The Banc of America High Yield Large Cap Index was back in the black in the week ended Thursday Dec. 19, after a downturn the previous week had broken an eight-week long winning streak for the market measure.

In the most recent week, the index rose 0.92%, versus the 0.33% decline in the week ended Dec. 12.

The High Yield Large Cap Index's year-to-date loss meanwhile narrowed to 3.41% from 4.29% the previous week. It has declined markedly from the 15.68% cumulative loss recorded in the week ended Oct. 10, just before the recent advance started.

The index's spread over Treasuries and yield-to-worst both also declined in the most recent week to 960 basis points and 12.71%, respectively (versus 974 basis points over and 12.93% in the previous week).

The steady gains seen in nine of the past 10 weeks have gone a long way toward bringing the index's performance for the year more closely into line with its showing at the end of 2001, when the B of A market measure suffered an approximate 3% loss for the full year. The spread at the end of 2001 was somewhat over 900 basis points off Treasuries and its year-end yield-to-worst was above 13.50%.

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 over $500 billion.

The bank's High Yield Broad Market Index, which includes issues of $100 million or more, meantime, also was on the comeback trail in the most recent week, gaining 0.64% with a spread of 963 basis points and a 12.57% yield-to-worst, versus the previous week's loss of 0.13%, its 982 basis points spread and 12.85% yield-to-worst.

The HY Broad Market Index's year-to-date performance improved to 1.04% from a 0.40% return the week before. In late November, the cumulative measure had swung back into the black after several months of having shown a loss.

Reversing the trend seen in the week ended Dec. 12, when there was no clear predominance between advancers and decliners among the 27 industry sectors into which B of A divides its indices, advancers led decliners in the most recent week, 16 to 11.

The biggest gainer in the most recent week was the utility grouping, which jumped 3.57%, as AES Corp.'s debt continued to strengthen after the independent power producer completed its bond exchange offer and its bank refinancing deal; its 9 3/8% notes due 2010 gained 10½ points to close at 60.5, while its 9½% notes due 2009 gained 9.5 points, also to 60.5.

In the previous week, the utility sector had been the second-strongest performer, gaining 0.86% in the immediate wake of the refinancing transaction and bond exchange offer. The best performer in the Dec. 12 week had been international cable, up 1.96%.

The domestic wireline telecommunications operators were the second-best performing sector in the most recent week, with what the B of A analysts termed "broad-based strength posted across the sector." Level 3 Communications Inc.'s zero-coupon/10½% senior discount notes due 2008 rose nearly two points to end at 47.25. It was a big turnaround for the domestic wirelines, which a week ago had been on the Bottom Five list of the week's worst performers with a 1.05% loss.

International cable (up 2% on the strength of United Pan-Europe's better than two-point gain), international wireline (up 1.88%) and satellite services (up 1.83%) rounded out the Top Five list of the week's best performers; in the previous week, the global cablers, as already noted, led all sectors, while satellite services had been among the big losers, with a 1.16% decline.

On the downside, chemical companies dropped 0.74% as Lyondell Chemical Co. bonds dropped as much as two points on rising oil and gas prices, its 9 7/8% notes due 2007 down a 1½ points at 96.75. The technology sector had led all losers the previous week, with a 1.63% loss.

Steel bonds dropped 0.59% as AK Steel's bonds were down about a point across the board (9% notes due 2007 down a point to 101.5). Steel had been among the strongest finishers a week earlier, with a 0.52% gain.

Entertainment (off 0.38% on weakness in cruise operator Royal Caribbean and theme park operator Six Flags); lodging (down 2.23%) and non-ferrous metals and mining (off 0.19%) rounded out the Bottom Five for the most recent week.

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