Advantage Data: Real estate, brokers lead as most junk sectors gain on week; food makers off

By Paul Deckelman

New York, Nov. 30 - High-yield industry sector returns mostly extended their gains in the week ended Friday, according to statistics supplied to Prospect News by Advantage Data Inc., the third straight week of upside following a two-week losing streak before that.

The high-yield universe thus continued its recent pattern of strength, with advancing sectors outnumbering the losers now in 11 weeks out of the last 14 and 16 weeks out of the last 20.

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 clearly the best-performing sector for a third consecutive week, while financial brokerages and exchanges, paper, chemical and electronics manufacturing and automotive services also posted notable gains.

For yet another week, there were relatively few sectors overall finishing on the downside. Notable losers among the significant sectors were food manufacturing, amusements, business services and metals production.

Of the 71 broad-industry sectors into which Boston-based Advantage Data currently divides its high-yield universe, 55 showed positive returns in the holiday-shortened week ended Friday, while 16 lost ground, continuing the trend seen in the previous week, ended Nov. 20, when 59 sectors finished in the black and 12 ended in the red.

Among the 30 significantly sized sectors, 26 had positive returns in the latest week and just four were on the downside, extending the trend seen the week before, when 22 sectors had positive returns and eight were negative.

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 during the week continued to hit new total return peak levels for 2009, well north of the psychologically significant 50% mark - with the easing trend seen earlier in the month now all but forgotten.

A hat trick for real estate

Among specific sectors, bonds of real estate companies easily led all the major sectors for a third straight time, up by 1.27% in the latest week, versus 3.09% the week before. Financial brokerages and exchanges posted a 1.04% return on the week.

Among the manufacturers, papermakers were up by 0.93% on the week, chemical manufacturing by 0.77% and non-computer electronics manufacturing by 0.64%. Automotive services - mostly car rental companies' bonds - gained 0.61%. Miscellaneous retailers returned 0.60%, while lodging and non-depositary financial institutions were each up by 0.57%.

Chemical manufacturing, along with real estate, was thus among the leaders for a third straight week, the previous two of them as runner-up to the realty credits, including the 1.19% gain seen in the Nov. 20 week. Miscellaneous retail and paper manufacturing had also been among the leaders the previous week, when they notched advances of 0.99% and 0.77%, respectively.

Food manufacturers falter

On the downside, bonds of companies which manufacture food products had the worst loss, 0.30%. The amusements sector was down 0.23%, business services were off 0.21%, and metal processing down 0.15%. Several other sectors actually ended in the black, but with extremely weak returns - depositary financial institutions, up 0.03%, and the insurance carrier and petroleum refining sectors, each ahead by just 0.07%.

In the previous week, business services had been the worst finisher (down 0.64%), with depositary financial institutions (down 0.59%), insurance carriers (down 0.13%) and amusements (down 0.09%) also among the notable losers. Metal processing, however, had been among the leaders the previous week, with a 0.53% return.

Real estate leads for year

Advantage Data reported that among the significantly sized sectors, real estate, riding its third consecutive strong weekly performance, remained the top year-to-date performer with a 226.61% return, while financial brokerages and exchanges showed a 112.57% cumulative gain. Automotive services were up by 87.73% on the year, and electronics manufacturers up by 83.60%.

On the downside, no significantly sized sectors are in the red year to date. Wholesale durable goods was up a relatively modest 21.26%, followed by food stores (up 24.51%), lodging (up 25.26%), amusements (up 26.34%), depositary financial institutions (up 26.41%) and miscellaneous retail (up 28.12%).

Key market indicator strong

Looking at the overall domestic high-yield market, junk, as measured by the Merrill Lynch High Yield Master II Index, had a one-week return of 0.331% as of Friday, boosting its year-to-date return to 52.946% - a new peak level for 2009 - versus 52.448% at the end of the previous week.

The average price of a high-yield issue covered by the Master II stood at 92.664 at Thursday's close, with a spread to worst of 765 basis points over comparable Treasuries and a yield to worst of 9.69% - versus a price of 92.529, a spread of 755 bps and a yield of 9.69% the week before.

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