Market Flat On The Week, Year Not Much Better


Secondary trading was, to put it mildly, light last week. As expected, many traders were out of the office, leaving a skeleton crew at many of the investment banks.

Some of the sparse activity in the market came from Charter Communications in the wake of its announced $900 million new issue, one of the only new issues in the market. The cable company's existing 8.625% bonds due in 2009 were trading at about 325 basis points above Treasurys, which is slightly tighter than the 350 basis points that it priced at in March.

There are expected to be about $15 billion in new issues in the first quarter, coming from both sides of the Atlantic. Some of the benchmark names, such as Level 3 Communications and United Pan-Europe Communications are expected to tap the market.

In the year through Dec. 16, the high yield market had returned 2.26% according to the Bear Stearns High Yield Index, with the bulk of that coming from the non-rated issues and single-B issues, posting returns of 10.06% and 2.76%, respectively.

In a sector breakdown, the best performing areas for the year to date were basic materials, which consists of chemicals, forest and paper products, metals, and mining issuers. Collectively, basic material returned a comparatively high 8.34% through the middle of December.

The media portion of the index, at 6.99%, was the second-best performing industry with telecommunications, 6.92%, and energy, 6.29%, close behind.

The worst-performing index sector, by far, was consumer non cyclicals, returning a disappointing -9.17 for the year. The next worst was technology, at -2.41%.

For the fourth quarter to date, as of Dec. 16, the best performing bonds again came from the non-rated and single-B areas, posting returns of 4.04% and 2.17%. And basic materials again led the way with a 3.35% return, with media close on its heels at 3.33%.

In the month to date, however, it was a different picture, with the finance sector leading the high yield charge, posting a 3.35% return. Telecom was second at 1.39% and all other categories posted positive numbers, but they were all less than 1% for the month.