B of A High Yield Large-Cap Index down 0.95% in week; YTD gain cut to 1.28%

By Paul Deckelman

New York, Jan. 23 - The Banc of America High Yield Large Cap Index suffered its first loss of the new year, returning negative 0.95% in the week ended Jan. 17. That brought to a quick halt the momentum of the advances in the previous two weeks, including the week ended Jan. 10, when the index had returned 1.22%.

The index's year-to-date gain was cut to 1.28% from 2.26% the week before.

In the most recent week, the index's spread over Treasuries widened to 874 basis points from 846 basis points the week before, while its yield-to-worst increased to 13.13% from 12.98% the week before. Even with the latest retrenchment, the gains in these two performance measures since Jan. 1 still represent an improvement from the levels at which the index had ended 2001, with a spread of over 900 basis points and a yield-to-worst of over 13.50%.

In the most recent week, the index tracked 359 issues with a total market valuation of $148.118 billion, up from 352 issues worth $146.743 billion in the week ended Jan. 10. 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 worst performer among the three credit tiers into which B of A divides its index was the lowest tier - bonds rated B- and below (24.34% of the index) fell 2.98%. Next was the middle tier (issues rated BB-, B+ and B, comprising 55.43% of the index), which was down 0.35%. The smallest loss was seen in the top tier - issues rated BB+ and BB (20.23% of the index), which eased 0.06.

The worst performing industry sector in the most recent week was domestic wireline telecommunications operators, down 6.66%, led downward by Williams Communications Group Inc.'s 11.7% senior notes' eight-point slide, following a two-notch downgrade in the Tulsa, Okla.-based long distance carrier's debt by Standard & Poor's. In the previous week, the domestic wirelines had actually been the top performers, up 4.50% - led, ironically, by a rise in the same Williams Communications issues. The worst performing sector the week before had been the consumer non-cyclical issues, down 0.94% .

International cable companies were the second-worst grouping in the most recent week, losing 5.97% on the continued problems of U.K.-based NTL Communications Corp. The week before, the international cablers had been among the Top Five strongest sectors, with a 3.47% return.

PCS/cellular companies (down 5.80% as the sector, particularly Nextel Communications Inc., saw widespread weakness in fourth-quarter results and lower-than-expected subscriber growth); international wireless companies (down 2.73%) and non-ferrous metals and mining (down 1.85%) rounded out the Bottom Five list of the week's worst performers. It was the second straight week near the bottom for PCS/cellular (down 0.78% the week before) and non-ferrous metals and mining (up a meager 0.49% a week earlier, amid much larger gains elsewhere) The international wireless operators had meanwhile been in the Top Five the previous week, with a 3.74% return).

On the upside in the latest week, lodging issues signed in with an index-best 1.83% return, led by gains in Host Marriott and Meristar Hospitality bonds. In the previous week, as noted, domestic wireline issues had dominated. Consumer non-durable goods companies were second-best, up 1.76% as Levi Strauss & Co.'s 11.625% notes due 2008 jumped 10 points on positive fourth-quarter results. The consumer non-durables had been among the weakest performers the week before, up just 0.27% amid considerably larger gains in most other sectors.

Publishing (up 1.73% on PRIMEDIA Inc.'s announced plans for a big sale of some non-core assets), transportation (up 1.47%) and entertainment (up 1.37%) rounded out the list of the Top Five best performers in the most recent week.

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