Advantage Data: Lodging, amusement led major-sector surge last week; food stores again falter

By Paul Deckelman

New York, Oct. 12 - The high-yield market showed gains for an eighth consecutive week during the period ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc., continuing the strong pattern seen in the previous week, ended Oct. 1.

Gaining sectors have now outpolled losing sectors in nine weeks out of the last 10 and in 15 weeks out of the last 17 weeks.

For a second straight week, 71 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 only two ending in the red. Such lopsided positive-sector breakdowns have been seen over almost all of the weeks since around the middle of July, including the stretch seen over the last six weeks in which more than 60 sectors finished in the black each time.

That robust trend was just as pronounced this week among the 30 most significantly sized sectors, as measured by the number of issuers, the collective number of issues and the total face amount of securities tracked. Some 29 of those sectors showed gains - many of them of at least a full percentage point or more - and just one posted a loss, pretty much continuing the pattern of strength seen in the previous week, when all 30 sectors ended in the black and none finished in the red for the second time in three weeks.

The biggest gainers in the latest week among those major sectors were the bonds of lodging operators, amusement companies and publishers. Bonds of food store companies again were the worst laggards.

On a statistical basis, the junk market's year-to-date performance, as measured by the widely followed Merrill Lynch High Yield Master II index, ended the week having risen from the previous Friday for a sixth consecutive week, establishing the latest in a string of new 2010 year-to-date peak levels.

Lodging checks in with strong showing

Among the specific significantly sized sectors, the single best finisher this past week was lodging, which returned 1.86%. It was the second strong showing in a row for the sector, which had risen 1.11% in the week ended Oct. 1 in bouncing back from the week before that, ended Sept. 24, when it had the worst showing of all major sectors with a 0.33% loss.

Lodging grabbed the top spot by the narrowest of margins, barely edging out amusement, which returned 1.83%. That volatile sector had also been among the big winners the previous week with a 1.04% gain, and among the worst performers the week before that, with just a 0.04% rise.

Other sectors showing notable strength, with returns of at least a full percentage point or more in the latest week were publishing (up 1.77%), paper manufacturing (up 1.49%), real estate (up 1.30%), chemical manufacturing (up 1.27%) and transportation equipment makers (up 1.11%). Financial brokers and exchanges gained 1.04% and the electronics manufacturing and investment and holding offices sectors each rose by an even 1.00%.

The chemical and electronics makers had each also been among the solid gainers the previous week, up 0.99% and 0.98%, respectively.

On the downside, food stores had the single worst showing among the significantly sized sectors for a second consecutive week, down 0.06%, following the prior week's relatively anemic 0.21% return. It was the only major sector in the red, as noted.

Other majors showing relatively meager gains were electric and gas services (up 0.31%), automotive services (up 0.42%), metals mining (up 0.46%) and depository financial institutions (up 0.50%).

Automotive services - chiefly vehicle rental companies - had actually been the top finisher among the big sectors the week before, with a 1.84% gain, but has now been among the underachievers in two weeks out of the last three.

Financials top yearly results

As has been the case for most of the year, financial sectors generally continue to show the strongest performance among the significantly sized sectors on a year-to-date basis, led by the bonds of insurance carriers (up 26.37%), depository financial institutions (up 21.63%), non-depository institutions (up 18.13%), real estate (up 11.95%), brokers and exchanges (up 11.84%) and investment and holding offices (up 11.52%).

Other notable cumulative gainers among the majors with 40 weeks now in the books and 12 to go early in the fourth quarter include the bonds of transportation equipment makers (up 15.26%), electronics manufacturers (up 14.83%), metals miners (up 13.03%), amusement (up 12.57%), chemical makers (up 12.40%) and oil and gas exploration and production (up 11.10%).

No significantly sized sectors were in the red on a cumulative basis this past week. Food stores (up 5.89%) and automotive services (up 7.16%) have had only relatively modest year-to-date net advances.

Key market indicator climbs

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, continued to push upward this past week, establishing a successive series of new high points for the year each day of a second straight week.

The index rose by 0.984% on the week and its year-to-date return as of Friday stood at 13.075% - up from 11.973% at the end of the previous week, and a new high point for the year, eclipsing the previous mark of 12.963%, set just the session before. The index's low for the year was a 0.357% loss recorded in the week ended Feb. 12.

The average price of a high-yield issue covered by the Master II stood at 101.897 at Friday's close, with a yield to worst of 7.42% and a spread to worst of 623 basis points over comparable Treasuries, versus a price of 101.043, a yield of 7.67% and a spread of 634 bps at the end of the previous week.

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