B of A High Yield Large-Cap Index up 0.16% in week; YTD loss 0.18%

By Paul Deckelman

New York, April 9 - The Banc of America High Yield Large Cap Index inched up 0.16% in the week ended April 4, getting back in the black - however barely - after having fallen 0.57% in the week ended March 28 (Banc of America did not publish the index that week, which saw abbreviated trading due to the Easter and Passover holidays). The latest week's small gain cut the index's year-to-date loss to 0.18%.

In the most recent week, the index's spread over Treasuries stood at 774 basis points, while its yield to worst was 12.53%.

Even with its recently inconsistent performance, zig-zagging back and forth between positive and negative (after having begun the year strongly with three straight weeks of sizable gains), the index continues to show a significant 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%. 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 354 issues with a total market valuation of $147.944 billion.

The best performer among the three credit tiers into which B of A divides its index was the top credit tier - issues rated BB+ and BB (18.36% of the index), with a gain of 0.65%. Next was the lowest tier - bonds rated B- and below (23.96% of the index), which was up 0.51%. Bringing up the rear was the middle tier (issues rated BB-, B+ and B, comprising 57.68% of the index), which lost 1.14%.

In the most recent week, international cable operators were the strongest performers, up 4.53% as NTL Inc.'s bonds, such as its 11½% notes due 2006, firmed four points. B of A analysts noted that "the market had already priced in the missed April 1 interest payments that were due on three of NTL Communication Corp's issues, and bonds rallied as conversations regarding possible restructuring continued."

The domestic wireline issues were the second-best grouping, up 2.65% on the strength of Williams Communications Group and Level 3 Communications Inc. Even though Williams also deferred interest payments due April 1 on its 10.70% and 10 7/8% senior notes and remains in discussions for a likely Chapter 11 filing, its bonds were about a point stronger.

Industrials (up 1.13%, given a boost by the six-point gain in Case Corp.'s 7¼% notes due 2016, steel issues (up 0.92%) and energy names (up 0.61%) rounded out the list of the Top Five best-performing sectors in the latest week.

On the downside, non-ferrous metals and mining was by far the weakest finisher, dropping 3.79% as Glencore Nickel Pty. Ltd.'s 9% notes due 2014 dove 23 points, losing fully half of their value.

Transportation issues fell 1.24%, on investor worries over higher fuel costs. "Profitability also remains a concern for the sector as the timeframe for airlines to return to profitability has been extended," the B of A report added, noting that United Air Lines' 10¼% notes due 2021 dropped 5½ points on the week.

North American cable operators (off 0.53%, chiefly due to the continued erosion in Adelphia Communications Corp. bonds following the company's revelation of off-balance- sheet debt and its delayed 10-K filing), PCS/cellular providers (down 0.50%) and advertising-dependent media (0.30% lower) rounded out the Bottom Five list of the worst-performing sectors in the latest week.

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