Advantage Data: Financials, manufacturers lead junk sectors' rebound; publishing, lodging lower

By Paul Deckelman

New York, June 15 - Bonds of most high-yield industry sectors were back in the black in the week ended on Friday, according to statistics supplied to Prospect News by Advantage Data Inc. The sectors were rebounding from the unusual downturn seen the week before, ended June 5, which was only the second downturn in a 12-week period.

In the latest week, among the more significant broad-industry sectors and subsectors - as measured in terms of the number of issuers, the collective number of issues and the total face amount of bonds tracked - financial groupings such as real estate, securities brokers, banks and other depositary institutions and insurance carriers ruled the roost. Also joining those sectors at the head of the pack were such manufacturing sectors as electronics manufacturers, transportation equipment makers - paced by the all-important automotive subsector - and metals production.

Not too many sectors overall finished on the downside, and fewer still were among the significantly sized areas; laggards included publishing and lodging.

Of the 69 broad-industry sectors into which Boston-based Advantage Data currently divides its high-yield universe, 59 showed positive returns in the week ended Friday, while 10 had negative returns - a sharp reversal of the pattern seen in the June 5 week, when 50 sectors finished in the red, against 19 ending in the black.

Positive sectors have now dominated in 11 weeks out of the last 13.

Meanwhile, the overall junk market, as measured by the widely followed Merrill Lynch High Yield II Master Index, racked up another gain on the week, boosting its year-to-date return above the psychologically potent 30% benchmark.

Financials fired up

Financials showed strength across the board in the latest week, with the real estate broad-industry sector the strongest of them all, up 6.28%, paced by its key subsector, real estate agents and managers.

The brokerages and exchanges sector, with securities brokers and dealers as the most important component, followed up with a 4.19% return on the week.

Depositary institutions, led by commercial banks, gained 2.57% on the week, while non-depositary institutions, which includes business and personal credit institutions and mortgage bankers and brokers, were up by 2.09%. Life insurance carriers gained 1.77%, while investment and holding offices were up by 1.48%.

Electronics manufacturers excel

Among the significant manufacturing broad sectors, makers of electronic equipment other than computers had the most spark in the latest week, returning 3.73%.

The transportation equipment manufacturing sector - dominated by its largest component, motor vehicles and automotive equipment - drove upward by 3.03%, reversing the previous week's skid.

Metal producers, including steel mill operators, gained 2.89%. Other manufacturing sectors showing gains of at least 1% or more on the week included chemical makers, up 1.22%, and makers of machinery and computers, up 1.12%.

In the energy sphere, coal mining, particularly producers of bituminous coal and lignite, burned with a 1.75% gain, while oil and gas mining was up 1.08% and electric and gas services were up 1.16%.

Metals mining gained 1.42% and building construction 1.22%, the latter led by its dominant operative residential builders' subsector. Bonds of companies in business services and amusement services returned 1.97% and 1.18% on the week, respectively.

Publishing punished, lodging lags

Among the few significantly sized broad-industry sectors to fall by the wayside, publishing did the worst, losing 1.04% on the week. Lodging was also a sizable loser, dropping 0.61%. Food manufacturing eased by 0.08%.

Retail food stores, led by the dominant grocery stores subsector, rang up an anemic 0.28% return on the week.

Real estate, brokers, car-rental up on year

Advantage Data reported that the real estate sector - the leading major sector on the week, as noted - was boasting a 73.85% year-to-date return, tops among all of the significantly sized broad-industry groupings.

Also among the financials, the brokerages and exchanges sector, another big gainer on the week, showed a 48.12% return for 2009 so far.

Automotive services, dominated by vehicle-rental companies, while posting only a relatively moderate weekly gain (up 0.76%), had a very solid 42.71% '09 cumulative return.

Other notable gainers among the largest sectors on a year-to-date basis included business services - led by its computer programming and data processing segment (up 37.37%), electronics manufacturing (up 34.82%), metals production (up 32.94%), oil and gas mining (up 31.94%), building construction (up 31.89%), telecommunications (up 31.02%), metals mining (up 30.67%), amusement services (up 29.71%), non-depositary financial institutions (up 28.03%), chemical manufacturing (up 27.06%) and investment and holding offices (up 26.87%).

On the downside, no significantly sized sectors were in the red year to date, or even only in the single-digits on a percentage basis.

Market gains continue

Looking at the overall domestic high-yield market, as measured by the widely followed Merrill Lynch High Yield Master II Index, junk showed a 1.74% one-week gain, lifting its year-to-date return to 30.43% from 28.19% seen the previous Friday, June 5.

The average price of a high-yield issue covered by the Master II stood at 78.63 as of the close on Friday, with a spread to worst of 1,024 basis points over comparable Treasuries and a yield to worst of 13.09% - versus a price of 77.04, a spread of 1,050 bps and a yield of 13.42% the week before.

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