Banc of America High Yield Broad Market Index up 0.02%, year-to-date return 1.96%

By Paul Deckelman

New York, Aug. 8 - The Banc of America Securities High Yield Broad Market Index returned 0.02% in the week ended Aug. 4.

The minuscule advance was the index's eighth straight gain, including the 0.33% rise seen in the previous week and its 10th in the last 11 weeks.

On a year-to-date basis, the index's return edged up to 1.96%, after having moved up to 1.94% the week before from 1.61%.

At its worst, the year-to-date loss drooped to 3.31% in mid-May.

The index's spread over Treasuries, which in the previous week remained unchanged at 355 basis points, narrowed in the most recent week to 348 bps, while its yield to worst - which had previously moved downward to 7.60% from 7.64% - edged back up to 7.63%.

Large Cap Index down 0.07%

The more narrowly focused High Yield Large Cap Index lost 0.07% after having moved up by 0.37% the week before. It was the second time in three weeks that the index failed to post a positive return.

The year-to-date return, which had previously jumped to 1.84% from 1.47%, declined in the week ended Aug. 4 to 1.77%

High Yield Large Cap's spread over Treasuries, which in the week ended July 28 had edged up to 334 bps from 333 bps previously, narrowed to 328 bps in the most recent week. Its yield to worst widened out to 7.45%, after having declined in the previous week to 7.40% from 7.44%.

In the latest week, the more inclusive High Yield Broad Market Index tracked 1,708 issues of $100 million or more, up from 1,704 the week before, and the overall value of the issues rose to $556.3 billion from $553.9 billion the previous week.

The more narrowly focused High Yield Large Cap Index tracked 642 issues of $300 million or more, up from 636 the week before, and their total market value rose to $349.3 billion from $346.9 billion previously. Banc of America sees both indexes as reliable proxies for the $750 billion high-yield universe.

Bottom credit tier leads

On a credit-quality basis, the bottommost credit tier of the three tiers into which Banc of America divides its index - B- and below, 35.62% of the index - had the best return, 0.23%.

It was followed by the middle tier - BB-, B+ and B, 43.13% of the index - which remain unchanged. Bringing up the rear was the topmost tier - BB+ and BB, 21.25% of the index - down 0.30%.

It was a departure from the order seen in the week ended July 28, when the top tier had the best return, 0.55%, followed by the bottom tier, which returned 0.50%, and the middle tier at 0.20%, but marked a return to the pattern seen in the three weeks before that.

Bank of America Securities analysts said, "Although rising oil prices kept it in check, the market [by moving 'a tad' higher on the week] thus did hold in to the gains it accumulated in the past week."

The analysts further noted that the primary market "witnessed moderate activity," with 10 issuers bringing deals generating total proceeds of $3.59 billion to market by the close Thursday.

The total proceeds, though, were down from $4.2 billion from three issuers in the previous week.

Most sectors finish with gains

In the most recent week, 14 of the 23 industry sectors into which Banc of America divides its high-yield universe had positive returns.

That represents a deterioration from the strength seen the previous week when 20 sectors were in the black.

However, over the past 11 weeks, a clear majority of sectors have shown positive returns in each of those weeks. Before the index upturn that began in the week ended May 26, all or almost all of the sectors had shown losses in most weeks.

Chemicals (up 0.42%) had the best showing in the week ended Aug. 4, taking over from the steel sector, which had been the index leader in the previous two weeks, with returns of 0.86% in the week ended July 28 and 1.17% in the week ended July 21.

The steelers remained among the Top Five best-performing sector for the week for a fourth straight week with a 0.32% gain.

Entertainment (up 0.33%) and consumer non-durables companies and publishing (each up 0.30%) rounded out the Top Five list in the latest week.

The latest week's return was a turnaround for entertainment, which was among the Bottom Five weakest finishers in the July 28 week with an 0.13% return. However, entertainment has now been in the Top Five in two weeks out of the last three.

Transportation dragging

On the downside, transportation was once again the worst performing sector, losing 2.58%, as it was dragged downward by the sharp declines in the bonds of Delta Air Lines Inc. and Northwest Airlines Corp. on renewed market bankruptcy fears.

The sector had also been the single worst finisher in the July 28 week, when it lost 0.62%, and has now been in the Bottom Five in five weeks out of the last eight.

Cable-DBS operators lost 0.48% in the week, after being among the Top Five for the second time in three weeks with a 0.83% gain.

However, the cablers have now been in the Bottom Five in two weeks out of the past three.

Technology (down 0.06%), lodging (down 0.09%) and wireline telecommunications and non-ferrous metals and mining (both off 0.04%) rounded out the latest week's Bottom Five.

It was the third straight week in the Bottom Five for technology, which had a 0.21% loss the previous week, and the second straight week for non-ferrous metals and mining, down 0.15% in the previous week.

Wireline telecom, however, had been among the Top Five the week before, with a 0.62% gain - but has also now been among the Bottom Five in two weeks out of the past three.

On a year-to-date basis, the transportation sector's index-worst performance for the week pushed its cumulative loss for 2005 out to 12.66% from 10.34% the previous week.

However, consumer durables' deficit narrowed to 1.87% from 1.96% the previous week, while Top Fiver steel cut its year-to-date loss sharply to 0.52% from 0.84%. Paper and packaging's loss widened slightly to 0.47% from 0.45% previously. No other sectors were in negative territory on a year-to-date basis.

On the upside, PCS/cellular's year-to-date return dropped to 7.12% from 7.16% previously, but it clearly remains the index leader on a cumulative basis. Finance remains second best year to date, as its return improved to 5.37% from 5.09%. Top Fiver publishing rose to 4.17% from 3.86%.

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