B of A High Yield Large-Cap Index down 1.17% in week; YTD loss widens to 2.51%

By Paul Deckelman

New York, Feb. 25 - The Banc of America High Yield Large Cap Index continued to the slide in the most recent week, suffering its fourth decline in a row. The index dropped 1.17% in the week ended Feb. 21, a far wider loss than the previous week, when it had eased 0.18%.

The index's year-to-date loss widened substantially to 2.51% in the most recent week, from 1.36% in the week ended Feb. 14. The index had started the year strongly, with three consecutive weeks of sizable gains swelling the year-to-date return, before the market gauge turned uncertain for several weeks and then, finally, negative.

In the most recent week, the index's spread over Treasuries widened out to 888 basis points from 851 basis points the week before, while its yield-to-worst likewise grew to 13.23% from 12.94%.

While the index continues to show an overall improvement from where it stood at the end of 2001, when it lost about 3% overall for the year and posted a spread at year's end of over 900 basis points off Treasuries and a yield-to-worst of over 13.50%, the magnitude of the improvement has recently been trimmed notably from where it was earlier in the year. 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.

In the most recent week, the index tracked 339 issues with a total market valuation of $137.702 billion, down from 341 issues worth $140.245 billion in the week ended Feb. 14.

The worst performer among the three credit tiers into which B of A divides its index was the lowest tier - bonds rated B- and below (23.62% of the index), which fell 1.41%. Next weakest was the middle tier (issues rated BB-, B+ and B, comprising 58.67% of the index), which was lost 1.20%. The top credit tier - issues rated BB+ and BB (18.42% of the Index), declined 0.79%.

In the most recent week, domestic wireline telecommunications led the way downward, dropping 6.32% on a five-point drop in the debt of Williams Communications Group Inc., amid investor angst over what its possible restructuring effort might look like. The group had showed a 1.80% gain the week before, when it was in the Top Five list of best-performing sectors. The steel sector, meanwhile, had been the worst-performing sector in the week ended Feb. 14, when it had fallen 3.81%.

Utilities (down 4.56% in the week ended Feb. 21 on the sharp slide in AES Corp. debt), PCS/cellular issues (down 3.45% on weakness in Crown Castle International Corp. and Spectrasite Holdings Inc.), North American cable (down 2.45%) and international wireless (down 1.53%) rounded out the Bottom Five list of the week's worst performing sectors; both utilities and PCS/cellular had been among the worst industry groupings the previous week, when they lost 2.16% and 2.95%, respectively.

On the upside, advertising-dependent media was the top dog for a second consecutive week, rising 1.25% in response to a court ruling directing the Federal Communications Commission to revisit its regulations limiting ownership of television stations; the prospect of industry consolidation spurred the bonds of such current TV station owners as Paxson Communications and Sinclair Broadcasting. The previous week, the group had been up 1.96%.

Steel issues rose 0.75% in the most recent week, as U.S. Steel's 10¾% notes due 2008 edged up two points, although, as the B of A report pointed out, "on no significant news." The week before, the junk steelers, as already noted, had been the worst performers, with a 3.81% loss.

Healthcare names (up 0.42% on improvement in HCA - The Healthcare Company and Fresenius AG), transportation (up 0.38%) and non-ferrous metals and mining (also up 0.38%) rounded out the list of the Top Five best performers for the week.

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