Convertibles market up 5.0% in April, Citigroup says

New York, May 2 - The convertibles market gained 5.0% in April, helped by strong performance in both the underlying stocks and high-yield bonds, according to a new report from Citigroup. It is now up 8.8% so far this year.

The S&P 500 posted a capitalization-weighted return of 8.2% in the month while the Wilshire 5000 returned 8.1%, noted Citigroup convertibles analyst Adrian Miller.

Junk bonds, in part due to an improving credit picture, gained 6.1%.

With those two contributors to the convertible market recording "very sound results," convertibles turned in an performance Miller described as "quite impressive."

The stocks underlying convertibles added 11.5%.

The April gains pushed the cash-pay weighted average conversion premium to 81.9% from 96.1% the month before, Miller said. Weighted average delta rose to 49.5% from 46.9%.

Among sectors, utilities was the strongest with a 15.3% gain in the month. Second was consumer cyclicals at 6.1%. Utilities are now up 22.1% so far this year, the strongest sector.

Only two groups showed negative returns - health care with a 1.6% loss and energy, down 1.3%. Year-to-date the weakest sector is capital goods, up 0.30%.

By structure, convertible preferreds took first place for both April and the year so far with a 9.7% rise for the month and 15.0% so far this year. Zero-coupon bonds were the laggards with a 1.4% return for the month and 4.5% year to date.

Junk convertibles added 6.8% in the month for a year-to-date return of 15.5%. Investment grade issues rose 3.9% in April and 4.4% so far in 2003.

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