B of A High Yield Large-Cap Index up 0.17% in week; YTD loss cut to 2.21%

By Paul Deckelman

New York, March 4 - The Banc of America High Yield Large Cap Index moved back into positive territory for the first time this past week after four straight weeks of losses, although its overall return for the year remains negative.

The index edged up 0.17% in the week ended Feb. 28, a turnaround from the 1.17% drop in the week ended Feb. 21. That small gain in the most recent week narrowed the index's year-to-date loss to 2.21% from 2.51% in the previous week.

The index had started the year strongly, with three consecutive weeks of sizable gains swelling the year-to-date return, before the market gauge first turned uncertain for several weeks and then, finally, negative.

In the most recent week, the index's spread over Treasuries increased slightly to 891 basis points from 888 basis points the week before, while its yield-to-worst likewise widened slightly to 13.26% from 13.23%.

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 341 issues with a total market valuation of $138.053 billion, up from 339 issues worth $137.702 billion in the week ended Feb. 21.

The best performer among the three credit tiers into which B of A divides its index was the middle tier (issues rated BB-, B+ and B, comprising 57.35% of the index), which was up 0.74%. Next was the top credit tier - issues rated BB+ and BB (18.69% of the index), which firmed 0.40%. But the lowest tier - bonds rated B- and below (23.96% of the index) - lagged well behind with a 1.40% loss on the week.

In the most recent week, utility issues were the most powerful, leading all sectors with a 1.51% gain as AES Corp, bonds rebounded from their recent weakness by rising between three and four points. The week before, when advertising-dependent media led all comers with a 1.25% gain, the utilities had been in the Bottom Five grouping of worst-performing sectors, with a 4.65% loss.

Paper and packaging companies were the second-strongest grouping in the most recent week, up 1.44% on a five-point gain in Crown Cork & Steel bonds and a somewhat smaller gain for Owens-Illinois Inc. Energy (up 1.18%, largely fueled by a rise in Chesapeake Energy Corp. bonds), consumer non-cyclical and satellite services issues (both up 1.10%) rounded out the Top Five list of best-performing sectors.

On the downside, international wireless credits swooned 9.83%, led downward by Nextel International , which fell nearly four points as corporate parent Nextel Communications Inc. continued to distance itself from its troubled global affiliate. In the previous week, which saw the domestic wireline carriers as the worst laggards, with a 6.32% loss, the international wireless companies had still been in the Bottom Five, when they were down 1.53%.

The domestic wireline group - which, as noted, had been the prior week's single worst performer - had the second-worst showing in the week ended Feb. 28, losing 6.22% as Williams Communications Group Inc. bonds eroded badly on the company's acknowledgment that it might pursue a reorganization via a Chapter 11 filing.

International cable operators (down 1.51% on weakness in United Pan-Europe Communications NV and NTL Inc.), steelmakers (off 1.23%) and non-ferrous metals and mining companies down 0.41%) rounded out the Bottom Five list for the latest week; in the prior week, the steelers had been up 0.75% and the non-ferrous metals/mining issues up 0.38%, putting both in the Top Five.

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