Advantage Data: real estate, metals, insurance lead junk sectors' rebound; brokers, paper lag

By Paul Deckelman

New York, Oct. 13 - After a relatively rare down week, high yield industry sectors again turned mostly higher in the week ended Friday, according to statistics supplied to Prospect News by Advantage Data Inc. It was the sixth week in the past seven and the 11th week in the past 13 to show a clear upside bias.

In the latest week, among the more significantly sized broad-industry sectors - as measured by the number of issuers, the collective number of issues and the total face amount of bonds tracked - real estate was the biggest gainer, with notable strength also being shown by the metals production, metals mining and insurance carriers sectors.

On the downside, financial brokers and exchanges was the only major sector finishing in the red -and one of only four overall - while paper manufacturers and lodging, among others, had considerably weaker returns than most other sectors.

Of the 70 broad-industry sectors into which Boston-based Advantage Data currently divides its high-yield universe, 64 showed positive returns in the week ended Friday, while just six had negative returns - a rebound from the previous week's breakdown of 39 sectors in the red and 31 in the black. Among the 30 significantly sized sectors, 29 had positive returns and just one - financial brokerages and exchanges - ended in the red.

On a statistical basis, the junk market continued to show a very strong year-to-date performance, as measured by the widely followed Merrill Lynch High Yield Master II index, which headed back upward to a new 2009 peak level of above 49%.

Real estate rally leads gainers

Real estate posted a 1.91% return on the week, the best of any significantly sized sector, as it bounced back from its poor showing the previous week, ended Friday, Oct. 2, when it plunged 2.54%, one of the worst performances that week. With the latest rebound, real estate has now been among the better-performing sectors in six weeks out of the prior seven.

Also doing very well were metals production (up 1.60%), insurance carriers and metals mining (both up 1.39%), and chemical manufacturing (up 1.23%). The latter was one of the few sectors also showing upside (up 0.44%) the previous week.

Brokers, paper, worst performers

On the downside, financial brokers and exchanges was the only significantly sized sector - and one of just four industry groupings overall - to finish in the red, slipping 0.04%. Several other sectors did finish in the black but had unusually weak positive returns - paper manufacturing (up 0.01%), lodging (up 0.17%) and depositary financial institutions (up 0.23%). Lodging had been the single worst finisher the week before, when it slid 2.66%.

Real estate widens yearly gain

Advantage Data reported that among the significantly-sized sectors, real estate, riding the positive momentum of another strong week, fattened its year-to-date return to 180.29%, while financial brokerages and exchanges, which had a weak week, still had a 114.69% cumulative gain. Automotive services - mostly vehicle rentals - returned 80.65%, while electronics manufacturing showed a 77.99% return.

On the downside, no significantly sized sectors were in the red year-to-date. Depositary financial institutions showed a 15.03% return, the weakest major sector, followed by wholesale durable goods (up 17.79%).

Key market indicator heads north

Looking at the overall domestic high yield market, junk, as measured by the Merrill Lynch High Yield Master II Index, enjoyed a 0.892% one-week gain as of Friday, widening its year-to-date return to 49.023%, a new peak level for the year and well up from 47.706% at the end of the previous week.

The average price of a high-yield issue covered by the Master II stood at 91.041 at Friday's close, with a spread to worst of 780 basis points over comparable Treasuries and a yield to worst of 10.16% - versus a price of 90.375, a spread of 810 bps and a yield of 10.36% the week before.

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