Advantage Data: Insurance, amusement led junk major-sector gains last week; real estate a loser

By Paul Deckelman

New York, Jan. 18 - The high-yield market continued its upside ride in the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

The market rose for a seventh consecutive week, a winning streak dating back to Dec. 3. Gaining sectors have now outpolled losing sectors in 19 weeks out of the last 23, dating back to the week ended Aug. 13.

Some 66 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 two ending in the red and five sectors showing not enough statistically meaningful activity to produce any kind of results. In the previous week, ended Jan. 7, there were 62 sectors recording positive returns, with five having ended in negative territory, with one unchanged, showing neither a gain nor a loss, and the five sectors with no results.

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, 29 ended in the black this week, against just one finishing in the red. That continued the bullish trend seen the week before when 28 of those sectors had positive returns, one recorded negative results and one showed neither a gain nor a loss.

The best performer among the major sectors this past week was insurance carriers, followed by amusement providers, lodging companies and coal miners.

On the downside, real estate was the only sector actually in the red on the week, while several other sectors had relatively meager 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, continued to show solid gains two weeks into 2011, with advances seen each day of the week. It was the seventh straight week of continued advances for the index.

Insurers show most improvement

Among specific significantly sized sectors, the single best finisher this past week was insurance carriers (up 0.90%), closely followed by amusement (up 0.88%), and then lodging (up 0.83%), coal mining (up 0.79%), food stores (up 0.76%) and oil and gas drilling and development (up 0.71%).

It was the fourth consecutive week among the elite finishers for amusement and the second in a row for oil and gas. The results represented a strong comeback for lodging, which had ended the week before among the worst finishers, but which has now been among the big gainers in three weeks out of the last four, including the last two weeks of 2010, when the group led all major sectors for two straight weeks. Food stores made a rare visit to the big gainers, after having been among the worst finishing sectors for the previous five straight weeks.

On the downside, real estate, as noted, was the only significantly sized sector finishing in the red this past week, with a 0.15% deficit. Other underachievers putting up just small returns included electric and gas services (up 0.05%), two financial sectors - brokers and exchanges and depository institutions - each up 0.09%, automotive services (up 0.17%) and metals mining (up 0.20%).

It was the third straight week among the laggards for metals mining, which had actually been the worst-performing major sector in each of the previous two weeks. In contrast, automotive services had been the best-finishing major sector the week before with a 1.50% return.

Amusement, refiners lead

On a year-to-date basis two weeks into 2011, bonds of most of the major-sized sectors have been strong, with 22 out of the 30 showing cumulative returns of at least one full percentage point or more.

Amusement was the leading sector (up 2.20% on the year so far), followed by petroleum refining (up 1.82%), automotive services (up 1.56%), the oil and gas and financial investment and holding offices sectors (both up 1.54%) and business services (up 1.53%).

There was no downside per se, as no sectors were in the red for the year, extending the trend which was in effect for most of last year.

The one sector which had begun the year the previous week on a losing note with a negative 0.16% return that week, metals mining, swung back into the black this past week for a 0.25% cumulative return, still the weakest among the key sectors.

Others showing just relatively modest year-to-date gains included this week's only actual loser, real estate (still up 0.54% on the year), food manufacturing (up 0.60%), the food stores and electronics manufacturing sectors (both up 0.63%), electric and gas services (up 0.67%), financial brokers and exchanges (up 0.69%) and machinery and computer manufacturing (up 0.87%).

Key indicator remains robust

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 seventh consecutive week, gaining 0.456% in the week ended Friday, on top of the 0.872% advance seen the previous week, the first of the new year. Gains were seen all five days of the latest week.

That left the index with a robust total return of 0.133%, up from 0.872% the week before. The index had finished 2010 the week before that, ended Dec. 31, with a total return for the year of 15.19%, beating most forecasts.

Looking at ongoing measures, the average price of a high-yield issue covered by the Master II finished at 102.918 at Friday's close, with a yield to worst of 7.156% and a spread to worst of 538 basis points over comparable Treasuries, versus a price of 102.602, a yield of 7.288% and a spread of 544 bps at the end of the previous week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.