Advantage Data: Insurers, food stores led key-sector surge last week, publishing punished

By Paul Deckelman

New York, May 2 - The high-yield market posted its sixth consecutive gain in the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

Those gains represent a continuation of the pattern of strength seen in the sector breakdowns for most of this year; after advances were seen in each of the first nine weeks of this year - part of a 14-week winning streak that dated all the way back to Dec. 3 - that streak was snapped by negative results in the weeks ended March 11 and March 18. However, the sectors rebounded in the following week, dated March 25, and have been on the rise ever since then.

Continuing the trend of solidly, and frequently overwhelmingly positive results most weeks, interrupted only by that two-week sojourn, some 64 of the 75 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 six ending in the red and another five sectors showing not enough statistically meaningful activity to produce any kind of results.

In the previous week - the holiday-shortened period ended Thursday, April 21 - there were 63 sectors which had recorded positive results, against seven posting negative returns and five sectors with no results.

Some 29 out of the 30 most significantly sized sectors, as measured by the number of bond issuers, the collective number of issues tracked and their total face amount, ended in the black this week, with only one finishing in the red. The week before, all 30 of those sectors had positive returns against no negatives.

Among specific sectors, insurance carriers, food stores and automotive services showed notable strength in the latest week. On the downside, only publishing actually finished in the red, although some other sectors, like coal mining and wholesale durable goods distributors, turned in particularly anemic positive returns.

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, rose on a Friday-to-Friday basis versus the previous week's cumulative return for a sixth straight week.

Insurers most improved

Among specific significantly sized sectors, the best-performing sector this past week was the insurance carriers group, which gained 0.88%. The sector has now been among the top finishers in two weeks out of the last three.

That was followed in the latest week by food stores (up 0.85%), automotive services, chiefly vehicle rental (up 0.80%), lodging (up 0.71%), precision instrument manufacturing (up 0.67%) and electric and gas services (up 0.61%).

It was the second straight week among the big winners for food stores and the precision instrument manufacturers, chiefly makers of medical devices. The utilities have now also been among the best performers in two weeks out of the last three, although before that, the volatile sector had been among the worst performers over three consecutive weeks.

On the downside, publishing lost 0.17%, the only sector actually finishing in the red this past week.

Several other sectors with particularly weak positive showings included coal mining (up just 0.05%), wholesale durable goods distributors (up 0.09%), machinery and computer manufacturing (up 0.15%), real estate (up 0.20%) and building construction (up 0.21%).

It was the second straight week among the worst performers for publishing and the machinery and computer manufacturers; coal mining, real estate and wholesale durable goods had each been among the better performers the week before, although the latter group has now also been among the underachievers in two weeks out of the last three. The construction sector has now been there in three weeks out of the last four.

Depository financials in lead

On a year-to-date basis 17 weeks into 2011, bonds of most of the major-sized sectors have been strong, with 28 out of the 30 showing cumulative returns of at least three full percentage points, including four above 6% year to date, 11 others topping 5% and nine more above 4%.

Depository financial institutions had the best cumulative return at 6.56%, followed by insurance carriers (up 6.53%), food stores (up 6.44%) and petroleum refiners (up 6.28%).

On the downside, metals mining had a relatively weak 2.18% year-to-date return, followed by real estate (2.66%) and publishing (up 3.18%).

Key indicator adds to gains

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, had a one-week return of 0.445%, on top of the previous week's gain of 0.242%. That left the index with a total return of 5.45% as of Friday, a new peak level for 2011, up from 4.983% at the end of the previous week.

As of Friday the index showed an average price of 104.463, a new high for the year, a yield to worst of 6.685%, its lowest point for the year so far, and a spread to worst of 499 basis points over comparable Treasuries, versus a price of 104.172, a yield of 6.777% and a spread of 493 bps at the end of the previous week.

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