Holiday Takes Toll on Secondary

The secondary high yield market last week took an early holiday along with traders and bankers. There was little trading activity on the week, partly due to Thanksgiving and partly due to the lack of drive-by offerings that in recent weeks bolstered secondary activity both before and after the new issues priced.

According to AMG Data Services, high yield mutual funds lost $309.7 million for the week ending Nov. 17, the latest time frame available. The previous week, though, a cash inflow of $807 million helped turn around the liquidity situation at many of the funds.

Two of the benchmark names in the market, Qwest Communications and PSINet, were both traded down about a half point, although the PSINet move was partly due to investors selling off the outstanding paper to make room for the company's new issue that was in the market.

Year to date, there have been a number of individual issues to hit the skids (see story on page 1), and they have taken their toll on the market overall in terms of returns.

The overall high yield market has returned only 0.98% for the year, according to the Bear Stearns High Yield Index. And just as illustrative is the fact that the average trading level for the issues in the index are at 86.7 as of Nov. 18.

Satellite communication companies, one of the sectors noted by investors as being one of the poorest performers in terms of individual issuers, not surprisingly also had the worst return, at negative 27.11%. As far as average bond prices are concerned, satellites are trading at an average of 67.54 as of Nov. 18, according to the index.

Healthcare and paging were two other areas that have performed poorly year to date, returning negative 13.77% and negative 25.53%, respectively. And the respective trading levels for those two industries are 82.79 and 60.79.

The two best-performing broad industry classifications year to date have been basic materials and energy, which have returned 7.48% and 5.71%. The average trading levels of those bonds, as of Nov. 18, were 89.9 for basic materials and 89.1 in the energy sector.