Advantage Data: Auto services, investment and holding led gains in prior week; metals mining lags

By Paul Deckelman

New York, Jan. 10 - The high-yield market opened 2011 in the week ended Friday pretty much the same way it had closed out 2010 - continuing its upside ride, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

The market showed gains for a sixth consecutive week dating back to Dec. 3 - more than making up for the previous three straight weeks on the downside during the weeks ended Nov. 12-26. Gaining sectors have now outpolled losing sectors in 18 weeks out of the last 22, dating back to the week ended Aug. 13.

Some 62 of the 73 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black in the latest week, with just five ending in the red, one unchanged, showing neither a gain nor a loss, and five sectors showing not enough statistically meaningful activity to produce any kind of results.

In each of the two previous weeks, ended Dec. 24 and Dec. 31, 69 of the sectors had recorded positive returns, with just four having ended in negative territory.

Among the 30 most significantly sized sectors, as measured by the number of issuers, the collective number of issues tracked and their total face amount, 28 ended in the black this week, against just one finishing in the red and one - food stores - showing neither a gain nor a loss. That continued the bullish trend seen the week before when 28 of those sectors again had positive returns and just two recorded negative results.

The best performer among the major sectors this past week was automotive services, followed by investment and holding offices, amusement providers and petroleum refiners.

On the downside for the week, metals mining was the only sector actually in the red, with food stores unchanged, as noted. Several other sectors had relatively restrained results.

On a statistical basis, the junk market's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, showed a solid gain for the first trading week of 2011, with advances seen each day of the week. It was the sixth straight week of continued advances for the index.

Automotive services outperform

Among specific significantly sized sectors, the single best finisher this past week was automotive services - chiefly vehicle-rental companies - whose bonds returned 1.50%. Also finishing with a better than a 1% gain on the week was the investment & holding offices grouping, which was up 1.01%. Amusement producers were just shy of that at 0.99%.

Other sectors showing strength were petroleum refiners (up 0.94%), oil and gas drilling and development (up 0.90%) and close behind, business services (up 0.89%).

It was the third consecutive week among the elite finishers for amusement and the second in a row for business services, which had posted gains of 0.85% and 0.81%, respectively, in the week ended Dec. 31.

On the downside, as previously noted, only one key sector, metals mining (down 0.13%), actually finished with a loss, while food stores had a flat 0.00% reading, neither a gain nor a loss. Sectors showing relatively modest performance against the backdrop of a generally strong week included food manufacturing (up 0.35%), lodging (up 0.47%) and the electronics manufacturing and metals production sectors, which were each up 0.53%.

It was the second straight week as the worst performer for metals mining, which also had that unwanted distinction the week before with a 0.08% loss. Food stores were among the underachievers for a fifth straight week, having recorded just a 0.29% gain the week before. Lodging, meantime, suffered a sharp comedown; the sector had been the top performer among all significantly sized sectors for the prior two weeks, with strong returns of 1.18% in the Dec. 31 week and 1.01% in the Dec. 24 week.

With just one week having passed so far in the new year, year-to-date performances for all sectors were essentially the same as their results for the week, deviating by no more than one- or two-hundredths of a percentage point.

Key indicator opens higher

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, continued to rise for a sixth consecutive week, gaining 0.872% in the week ended Friday, on top of the 0.512% advance seen the previous week, when it closed out 2010.

That left the index with a robust total return for the first week of 2011 of 0.872%.

The index had finished 2010 the previous week with a total return for the year of 15.19%, beating most forecasts, although it closed somewhat below last year's peak level of 15.602%, set on Nov. 9. The index's 2010 low, meantime, was a 0.357% loss recorded on Feb. 12.

Looking at ongoing measures, the average price of a high-yield issue covered by the Master II finished at 102.602 at Friday's close, with a yield to worst of 7.288% and a spread to worst of 544 basis points over comparable Treasuries, versus a price of 101.859, a yield of 7.498% and a spread of 560 bps at the end of the previous week.

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