B of A High Yield Large-Cap Index up 1.91%, third straight gain; YTD loss cut to 11.90%

By Paul Deckelman

New York, Nov. 5 - The Banc of America High Yield Large Cap Index posted its third consecutive gain in the week ended Thursday Oct. 31, jumping 1.91%. That gain followed the 0.58% advance in the previous week, ended Oct. 24.

The High Yield Large Cap Index's year-to-date loss narrowed markedly to 11.90% in the most recent week from 13.55% in the week ended Oct. 24. While still huge in objective terms, the year-to-date loss is still considerably smaller than the 15.68% drop - the biggest weekly cumulative loss for the year - which had been recorded in the week ended Oct. 10.

The index's spread over Treasuries and yield-to-worst both narrowed in the most recent week to 1,157 basis points and 14.68% versus 1,168 basis points over and 15.11% in the previous week.

Even with the sizable bounce seen in the past three weeks, the index's cumulative performance still remains badly below the relatively modest loss level at which it ended 2001, when the B of A market measure suffered an approximate 3% loss for the full year. The spread at the end of 2001 was somewhat over 900 basis points off Treasuries and its year-end yield-to-worst was above 13.50%.

In the week ended Thursday, the index tracked 380 issues with a total market value of $148.506 billion, up from 374 issues worth $142.193 million the week before. Banc of America sees the index, which tracks issues of $300 million and over, as a reliable barometer of trends in the overall high yield market of over $500 billion.

The bank's broader high yield index, which includes issues of $100 million or more, meantime tracked 1,368 issues worth $296.405 million.

The High Yield Broad Market Index was up 1.08% on the week and had a spread of 1,148 basis points and a 14.43% yield to worst.

Of the three credit tiers into which B of A divides its High Yield Broad Market Index, the big middle credit tier (issues rated BB-, B+ and B, comprising 50.18% of the index) had the best showing, gaining 1.34%. The bottom tier - bonds rated B- and below, making up 33.89% of the index, including many of the rebounding telecom and cable issues - gained 0.98% on the week, while the top credit tier (issues rated BB+ and BB, making up 15.93% of the index) was up 0.51%. It was the second straight week in which those tiers finished in the same order.

The best-performing industry sector in the high yield universe in the most recent week was the domestic wireline grouping, with a 7.31% gain, as issues of Time Warner Telecom Inc. jumped after the company disclosed that it had amended terms of its credit agreement to enhance the company's liquidity outlook and provide it with better flexibility. TimeWarner Telecom's 10 1/8% notes due 2011 and its 9.75% notes due 2008 rose 14 and 13 points, respectively, to close at 46 and 45.

Technology (up 4.49%, largely on the strength of Amkor Technology Inc. bonds), PCS/Cellular (up 2.42%), transportation (up 2.36%) and publishing (up 2%) rounded out the Top Five list of best performing high yield sectors in the most recent week.

On the downside, international cable names lost an Index-worst 5.46% as Telewest Communication's issues dropped between 4 and 5 points after an article in Times of London hinted that the company may default on £68 million of interest payments that were due on Oct. 31. The company subsequently confirmed that it would not make the interest payments. The 9 7/8% notes due 2010 closed at 11, 5.5 points lower than the previous week's close on the speculation that creditors may take their case to the English High Court.

The other losing sectors had more modest losses, with non-ferrous metals and mining (down 0.91%), industrials (0.86%) , international wireline telecom (down 0.75%) and chemical makers (off 0.47%) rounding out the Bottom Five list of the worst-performing high yield sectors for the latest week.

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