B of A High Yield Large-Cap Index up 1.22% in week; YTD gain grows to 2.26%

By Paul Deckelman

New York, Jan. 15 - The Banc of America High Yield Large Cap Index is batting two-for-two so far this year, returning 1.22% in the week ended Jan. 10. That came on the heels of a 1.42% jump in the previous week. Those gains represent a reversal of the weakness seen at the very end of 2001, when it lost nearly 3% on the year, with strong early gains eroded by the slowing economy later in the year and then altogether erased in the aftermath of the Sept. 11 terrorist attacks on the U.S.

It's a case of "so far, so good," however in 2002; the year-to-date gain more than doubled to 2.26% in the latest week, from 1.02% recorded the previous week.

In the most recent week, the index's spread over Treasuries declined to 846 basis points from 863 basis points the week before, while its yield-to-worst came down to 12.98% from 13.24% the week before. The gains in these two performance measures since Jan. 1 represent a sharp improvement from the levels at which the index had ended 2001, with a spread of over 900 basis points and a yield-to-worst of over 13.50%.

In the most recent week, the index tracked 352 issues with a total market valuation of $146.743 billion, versus 348 issues valued at $143.458 billion in the week ended Jan. 3. 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 around $600 billion.

The best performer among the three credit tiers into which B of A divides its index was the lowest tier - bonds rated B- and below (24.86% of the index) rose 1.64%. Next was the middle tier (issues rated BB-, B+ and B, comprising 55.10% of the index), which was up 1.14%. Bringing up the rear was the top tier - issues rated BB+ and BB (20.04% of the index), which showed a 0.92% gain.

The strongest performing industry sector in the most recent week was domestic wireline telecommunications operators, up 4.50%, paced by a three-point rise in Williams Communications Group Inc.'s 10 7/8% and 11.7% senior notes, after the Tulsa-based long distance carrier announced that it will likely meet its fourth-quarter guidance. It was the second consecutive strong performance for the group, which was second on the Top Five list of best performing sectors the previous week, when it was up 5.59%. The best-performing sector the week before, meanwhile, had been international cable operators, up 7.26%.

Paper and packaging companies held the second spot on the latest week's list, rising 3.83% as Crown Cork & Seal issues jumped around 10 points on the week.

International wireless operators (up 3.74%, as Microcell Telecommunications notes rose on favorable credit ratings news), international cable companies (up 3.47%) and technology issues (up 3.36%) rounded out the Top Five for the most recent week. The international wireless sector had been in the Top Five the week before, when it was up 5.36%, and the international cable companies, as noted, were the pest performers the previous week.

On the downside, consumer non-cyclical companies lost an index-worst 0.94% in the most recent week, pushed down by nine-point losses in Rite Aid Corp. paper after it revised its fiscal 2003 guidance downward. The week before, health care had been the least healthy sector, dipping 0.31%.

Finance names were down 0.91% in the most recent week, as the bonds of both Conseco Inc. and Finova Group were on the slide. The week before, the finance grouping had been among the Top Five, with a 3.18% return.

PCS/Cellular companies (down 0.78%, largely on weakness in antenna tower operators like American Tower Corp. and Crown Castle International), consumer non-durables (up a feeble 0.27%) and non-ferrous metals and mining (up 0.49%) rounded out the Bottom Five list of the week's worst-performing sectors.

End

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