B of A High Yield Broad Market Index up 0.51%; back in the black for year at 0.25%

By Paul Deckelman

New York, June 15 - The Banc of America Securities High Yield Broad Market Index rose 0.51% in the week ended Thursday and moved back into positive territory on a year-to-date basis, with a 0.25% cumulative return. In the previous week ended June 3, the index had eased 0.04% and had posted a year-to-date loss of 0.26%.

The modest upturn was the second in three weeks and the third in the last four weeks. Along with the almost negligible loss seen in the June 3 week, it continues the index's cautious recovery from a pronounced downturn that the market gauge had seen in late April and early May.

Bank of America did not officially publish its weekly high-yield market statistics due to last Friday's market closure in honor of the late president Ronald Reagan, but it made the relevant data available to Prospect News.

The previous week, ended June 3, had been holiday-shortened due to the Memorial Day break, with an abbreviated pre-holiday session on May 28 and a completely closed market on May 31.

In the latest week, the index's spread over Treasuries tightened to 466 basis points over from 486 basis points in the June 3 week, and the yield-to-worst narrowed to 8.49% from 8.59% the previous week.

Large Cap index gains 0.61%

Banc of America's more narrowly focused High Yield Large Cap Index has pretty much followed the same pattern as the High Yield Broad Market Index, with a 0.61% gain in the latest week versus the 0.05% loss the week before; the 2004 year-to-date loss was about cut in half to 0.59% from 1.19% the week before.

Large Cap's spread over Treasuries - like that of the High Yield Broad Market Index - narrowed in the most recent week, to 454 basis points over from 473 basis points in the week ended June 3. The yield to worst meantime declined to 8.48% from 8.56% the week before.

In the latest week, the more inclusive High Yield Broad Market Index tracked 1,628 issues of $100 million or more, as the total market value of the issues declined to $491.9 billion from $493.2 billion the week before, while the High Yield Large Cap Index, representing the most liquid portion of the high-yield world, tracked 585 issues of $300 million or more; total market value rose to $297.3 billion from $295.3 billion the week before. Banc of America sees both as reliable proxies for the $750 billion high-yield universe.

Lowest tier performs best

On a credit basis, the lowest of the three credit tiers into which Banc of America divides its index (issues rated B- and below, accounting for 41.41% of the index) again had the best showing, returning 0.68%. That was followed by the middle credit tier - consisting of those issues rated BB-, B+ and B and making up 44.65% of the index - with a 0.46% return. The highest credit tier (those credits rated BB+ and BB, comprising 13.94% of the index) brought up the rear with an 0.16% gain. In the previous week, the lowest tier had led with a 0.04% rise while the middle tier and the upper tier each had a 0.09% loss.

Of the 23 industry groupings into which Banc of America divides its high-yield universe, 22 showed gains and just one - gaming - was in the red. That contrasts with the previous week, when 10 of the subsectors showed gains, 11 showed declines and two - entertainment and utilities - had a flat showing.

Utilities best sector in week

Utilities clearly were the best-performing names, notching a 1.08% return on the week, a far cry from its 0.00% return the week before, when finance had been the leading sector, with a 0.28% gain.

Wireline telecommunications was the second-best performer in the index in the latest week, up 0.76%, while consumer durables companies (up 0.68%), paper and packaging (up 0.63%) and chemical makers (up 0.59%) rounded out the Top Five list of the best performing subsectors in the latest week.

Wireline had also been in the Top Five in the week ended June 3, when it gained 0.22%; the grouping has in fact been recently recovering after a rocky stretch earlier in the year, with the latest week's showing marking the fifth consecutive week that wireline has been among the best finishers. Chemicals, on the other hand, had been among the worst finishers the week before with a 0.27% loss.

Gaming worst sector for week

On the downside, only one grouping - gaming, as noted - finished in the red this past week, losing 0.13%. The week before, the airline-heavy transportation grouping had been the biggest loser, with a 1.03% deficit.

But even though they were not the worst this time around, the transportation issues were again on the Bottom Five list of the worst finishers for a second straight week and for the eighth week in the past nine, with a 0.11% gain - smaller than any other grouping, save gaming.

Finance and lodging (both up 0.19%) and energy (up 0.21%) rounded out the Bottom Five list of the week's weakest finishers. Finance, as noted, had been the top finisher the previous week, when it returned 0.28%, while lodging, with a 0.29% loss, had been occupying the Bottom Five list.

On a year-to-date basis, consumer non-durables companies continued to have the best return, fattening to 4.42% from 4.01% the week before.

Non-ferrous metals and mining's cumulative return strengthened to 3.75% from 3.33% the week before. Steelmakers rose to 3.55% from 3.05%. Consumer non-cyclicals and chemicals - the latter buoyed by its Top Five finish - both moved up to 2.91% from 2.40% and 2.31%, respectively, the previous week.

On the downside, the transportation group's small gain didn't even put more than a small dent in its status as worst year-to-date performer, although its loss did narrow slightly to 11.34% from 11.44% earlier.

Wireline telecom, buoyed by its fifth straight week in the Top Five, continued to dig out of the hole it had fallen into earlier in the year, its cumulative loss falling to 5.79% from 6.49% before.

On the strength of its index-best 1.08% return in the most recent week, the utilities group sharply narrowed its cumulative loss to 2.13% from 3.17% the week before.

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