Convertibles gain 5.0% in April, up 8.3% year to date, Merrill says

New York May 2 - The convertibles market gained 5.0% in April, pushing its year-to-date gains to 8.3%, according to a new report from Merrill Lynch & Co.

The figures are as measured by Merrill's All US Convertible index.

But convertibles were not alone in rising.

"All major U.S. benchmarks made big gains during April following the decisive victory by the coalition forces in Iraq," wrote Merrill analyst Marc Malloy.

Stocks underlying the convertibles increased 11.6% in the month.

With investors willing to trade down in quality to pick up yield, junk-rated securities performed strongly.

Speculative-grade convertibles added 6.9% in the month as their underlying stocks rose 14.3% and credit spreads tightened.

Investment-grade issues rose 3.2% against a 9.2% rise in their corresponding equities.

Small-capitalization names continued to lead. These issues rose 5.8% in April as their related stocks added 13.4%. Year-to-date small cap convertibles are 11.7% better even though the underlying equity performance is negative 0.1% - the resulted of tightening credit spreads helping the many busted names.

Large-capitalization convertibles gained 4.7% in April against their stocks' 11.5%. Year to date this group is 7.1% higher while their stocks are up 10.4%.

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