B of A High Yield Large-Cap Index jumps 2.37% on liquidity boost; year-to-date gain 10.42%

By Paul Deckelman

New York, April 8- The Banc of America High Yield Large Cap Index continued to rise for a seventh consecutive week, as the market measure gained 2.37% in the week ended Thursday April 3, on top of the 1.20% gain seen the previous week ended March 27.

As has been the case since the beginning of the year, the advance has been fueled by the ample liquidity which the junk bond market has enjoyed, with AMG Data Services having reported another $1.2 billion more came into high-yield mutual funds than left them in the latest week.

The weekly fund flow numbers are seen by market participants as a key barometer in overall high yield liquidity trends, and their surge since mid-October has been considered a major factor in a corresponding strong performance turned in by the Banc of America high yield indexes during that time.

The year-to-date return continued to improve to 10.42% - the high for the year so far - from 7.87% the previous week. The low point for the year was the 2.57% cumulative return seen in the week ended Feb. 13.

The index's spread over comparable Treasury issues in the latest week narrowed to 773 basis points from 826 basis points the week before, while the yield to worst correspondingly fell to 10.65% from 11.26%.

B of A's somewhat broader and more representative Banc of America High Yield Broad Market Index was meanwhile also much improved in the week ended Thursday, up 1.81%, versus its advance the prior week of 0.96% in the week ended March 27. The HY Broad Market Index's year-to-date return improved to 8.72%, up from 6.79% the prior week, and as was the case with the HY Large Cap Index, this was a new high point for the year so far. The HY Broad market Index's spread over Treasuries narrowed to 807 basis points from 852 bps the week before, with the yield-to-worst declining to 10.85% from 11.38%.

(The High Yield Large Cap Index, representing the most liquid portion of the high yield world, tracks nearly 450 issues of $300 million or more, having a total market value of around $212 billion. The High Yield Broad Market Index tracks about 1475 issues of $100 million or more, having a total market value of about $383 billion. B of A sees both as reliable proxies for the over $600 billion high yield universe.)

B of A analysts noted that the advance was extremely broad-based, with 25 of the 27 industry sectors into which it divides its high yield universe advancing on the week, while just two were decliners. The lowest of the three credit tiers into which it divides its high yield world outperformed the middle credit tier, which in turn outperformed the topmost credit tier.

In the most recent week, North American cable operators were the strongest performers, returning 5.19%, pulled up by an eight-point gain on average of the bonds of Charter Communications Holdings LLC, which released preliminary 2002 results and announced it would restate its financials back to 2002. But the restatements "show the company is growing, not contracting, as previously feared," the B of A analysts said.

PCS/cellular companies were the second-strongest finishers with a 4% gain, pushed up by a two-point gain in Nextel Communications Inc. bonds after Nextel made a $5 billion mixed shelf filing and a 7.5% jump in Crown Castle International's bonds.

Utilities (up 3.74% on news of continued asset sales and refinancings by sector players), domestic wireline telecommunications companies (up 3.54%) and lodging companies (2.35% better) rounded out the Top Five list of best-performing sectors for the week.

On the downside, transportation went from first to worst, its 0.55% retreat in contrast to its index-best 3.84% return in the week ended March 27; the sector was dragged down by weakness in the bonds of Delta Airlines and Northwest Airlines.

Consumer non-cyclical companies faded 0.04%, pulled lower by the nine-point loss in Fleming Companies Inc. debt after the troubled grocery wholesale distributor filed for bankruptcy .

The Bottom Five list of the weakest performers for the latest week was rounded out by sectors showing only paltry gains, versus the more robust advances seen elsewhere. These included non-ferrous metals and mining (up just 0.50% as most sector names remained flat and UCAR Finance Inc. lost a point), consumer non-durables (up 0.57%) and heathcare (0.68% higher).

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