B of A High Yield Large-Cap Index up 0.24% in week; YTD gain widens to 1.62%

By Paul Deckelman

New York, April 30 - The Banc of America High Yield Large Cap Index rose 0.24% in the week ended April 25, its fourth consecutive week on the upside, following the 0.85% gain seen in the week ended April 18. The latest week's advance widened the index's year-to-date return to 1.62%, from a 1.38% cumulative gain seen the week before.

In the most recent week, the index's spread over Treasuries stood at 739 basis points, essentially unchanged from 738 the prior week, while its yield-to-worst narrowed slightly to 11.93% from 12.03% in the April 18 week.

The index continues to draw strength from its non-telecom component, B of A's analysts said, its ex-telecom sub-index outperforming the overall index in the April 25 week, posting what the analysts termed a "respectable" 0.48% return. On a year-to-date basis, the ex-telecom sub-index is up a healthy 4.26%. It also now offers a yield-to-worst of 10.72%, and a spread of 621 basis points - 121 and 118 basis points tighter, respectively, than the same measures in the overall index.

Buoyed especially by its recently strong performance (the cumulative gain for April is a handsome 1.88%) after several weeks of inconsistency, the overall index continues to improve significantly from where it stood at the end of 2001, when it lost about 3% overall for the year, posted a spread at year's end of over 900 basis points off Treasuries and a yield-to-worst of over 13.50%. 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.

In the most recent week, the index tracked 352 issues with a total market value of $153.111 billion, versus 360 issues with a total market valuation of $151.231 billion the week before.

The best performer among the three credit tiers into which B of A divides its index was the top credit tier - issues rated BB+ and BB (18.99% of the index), with a gain of 0.81%, followed by the lowest tier - bonds rated B- and below (25.77% of the index), which was up 0.24%. The middle tier (issues rated BB-, B+ and B, comprising 55.23% of the index), was almost flat, inching up 0.06% on the week.

In the most recent week, consumer non-durable goods makers led the way with a 3.98% gain, powered by a 14-point advance in WestPoint Stevens Inc.'s 7 7/8% notes due 2005, after the textile maker in the previous week posted an unexpected profit for the quarter. That was quite a swing for the consumer non-durables, which the week before had been the weakest performing sector, down 0.58% on the week, although that decline occurred before the release late that week of the surprisingly strong results. The strongest sector in the April 18 week had been domestic wireline operators, which had risen 6.19%.

Utilities were the second-strongest finisher in the week ended April 25, gaining 2.26%. They were powered by Calpine Corp.'s 8½% notes due 2011, which firmed more than three points on the week, as marketeers initially shrugged off the company's warning that first-quarter earnings would not meet analysts' expectations to instead focus on the successful resolution of its power-supply contract renegotiation with the state of California, a significant power customer.

Industrials (up 1.37%, chiefly on a rise in Hexcel Corp.'s 9¾% notes due 2009), consumer durables companies (1.33% higher on the week) and publishing companies (a 1.22% gain) rounded out the Top Five best-performing sectors in the most recent week; publishing had been among the worst losers the previous week, when it was down 0.29%.

On the downside, domestic wireline operators - who, as noted, had been the strongest finisher the week before with a 6.19% gain - went from first to worst in the week ended April 26, tumbling 7.62%, as the troubles of high-grade telecommuniciations names WorldCom Inc. and Qwest Communications International Inc. spilled over into Junkbondland and caused significant losses for high yield telecommers like TimeWarner Telecom Inc. and the bankrupt Williams Communications Group. As already also noted, the index's worst performer the week before had been the consumer durables group - the latest week's top finisher.

Chemical makers were a part of the Bottom Five list of the worst-performing sectors for a third straight week, losing 1.25% as Lyondell Chemical Co.'s 10 7/8% notes due 2009 lost nearly five points. The week before, the chemicals had been down 0.27%, and they eased 0.04% the week before that.

North American cable operators (down 1.10% on delayed earnings reporting and a credit ratings downgrade for Adelphia Communications Corp.), international wireless providers (down 0.62%) and PCS/cellular companies (off 0.10%) rounded out the latest week's Bottom Five; the week before, international wireless (up 1.96%) and PCS/cellular (up 5.73%) had been among the sectors in the winner's circle.

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