B of A High Yield Broad Market Index up 0.34%, year-to-date gain increases to 24.21%

By Paul Deckelman

New York, Nov. 10 - The Banc of America High Yield Broad Market Index moved up

0.34% in the week ended Thursday Nov. 6, its twelfth consecutive weekly gain. That pushed its year-to-date cumulative gain to a new peak at 24.21%. In the previous week ended Oct. 30, the index had risen 0.44% to 23.78%, the year's previous high point.

In the latest week, the index's spread over Treasuries narrowed to 529 basis points, a new low for the year, from 547 bps the previous week, while the yield-to-worst meanwhile also went down to a new low for the year, at 8.43%, from 8.49%, the week before.

B of A's High Yield Large Cap Index rose 0.38%, its second consecutive weekly gain, after a 0.48% return the previous week. Large Cap's year-to-date return once again hit a new peak level for the year, at 27.14%, up from 26.65% in the week ended Oct. 30. In the latest week, the spread over Treasuries narrowed to 491 basis points from 509 bps the week before, while the yield-to-worst declined to 8.17% from the previous week's 8.24%; both the spread and the yield-to-worst narrowed to new year-to-date lows in the most recent week.

In the latest week, the more inclusive High Yield Broad Market Index tracked 1,601 issues of $100 million or more, having a total market value of over $483 billion, while the High Yield Large Cap Index, representing the most liquid portion of the high yield world, tracked 562 issues of $300 million or more having an aggregate market value of over $294 billion. B of A sees both as reliable proxies for the more than $700 billion high yield universe.

Banc of America Securities analysts noted "the continued demand for speculative grade paper," reflected in the latest weekly net inflow for high yield mutual funds of $440.5 million (the weekly mutual fund flow numbers are considered a reliable barometer of overall high yield market liquidity trends).

On a credit basis, the lowest of the three credit tiers into which B of A divides its index -

issues rated B- and below, accounting for 36.46% of the index - had the highest return, 0.44%, followed by the middle credit tier (those issues rated BB-, B+ and B, making up 48.42% of the index), which gained 0.30%. Bringing up the rear was the highest credit tier, representing credits rated BB and BB+ and comprising 15.12% of the index, which returned 0.26%. The order of finish was the exact opposite of the order - highest, middle, lowest - which had been seen in the previous two weeks.

Advancing industry sectors led decliners 20-7, continuing the recent trend of broad-based strength among the 27 industry groups into which B of A divides its index. In the week ended Oct. 30, there had been 26 sectors in positive territory and just one in the red. B of A analysts particularly noted the strength of the transportation, chemicals and telecom groups.

Transportation issue rose 0.98%, with Delta Air Lines and Northwest Airlines bonds leading the rise; Northwest's 9 7/8% notes due 2007 rose two points to 89.5, and Delta's 7.9% notes due 2009 gained a point-and-a-half to 83.5. In the week ended Oct. 30, chemicals had been the best performer, up 1.14%.

The chemical sector in fact almost made it two straight weeks at the top, trailing the transportations by just a tad in the latest week with a 0.97% return, second-best in the index; the sector benefited from the strong performances of IMC Global, whose bonds rose an average of three points over the week; Solutia Inc., whose bonds also gained three points; and Lyondell Chemical Co., whose notes gained about three-quarters of a point on average.

PCS/cellular (0.83% better, chiefly on strength in Triton PCS and Nextel Communications Inc. bonds), utilities (up 0.69%) and satellite services (0.61% better) rounded out the Top Five list of the week's best-performing sectors; in the previous week, PCS/cellular and utilities had been on the Bottom Five list of the weakest performers with paltry gains of 0.20% and 0.23%, respectively.

On the downside, North American cable lost an index-worst 0.37%, pulled down by Charter Communications, whose bonds lost a point-and-a half on average over the week. The previous week, international wireless had been the only sector in the red, with a 0.47% loss.

International cable had the second-worst finish in the most recent week, off 0.33% as British Sky Broadcasting notes lost half a point. In the previous week, the global cablers had been in the Top Five, with a 0.80% return.

Steel issues (down 0.25% on weakness in Oregon Steel Mills and Gerdau Ameristeel Corp. as both companies posted weak third-quarter results), non-ferrous metals and mining (down 0.13%) and lodging (off 0.12%) rounded out the latest week's Bottom Five list; the steels had been in the Top Five the week before, with a 0.90% return.

On a year-to-date basis, international wireline telecom's cumulative gain improved to 71.38% from 70.77% the week before, while second-place international wireless telecom kept pace with a 65.28% return, up from 64.65% the week before.

The steelmakers remained the only one of the 27 industry sectors in the red for the year-to-date, with its 0.25% loss in the latest week widening its cumulative loss to 1.47% from 1.22% the previous week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.