Advantage Data: Rebounding publishers, real estate led major-sector surge last week; metals melt

By Paul Deckelman

New York, Nov. 2 - The high-yield market showed gains for an 11th consecutive week during the period ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc. That continued the strong pattern seen in the previous week, ended Oct. 22. Gaining sectors have now outpolled losing sectors in 12 weeks out of the last 13 and in 18 weeks out of the last 20.

Some 70 of the 74 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 just four ending in the red. That extended and strengthened the trend seen the previous week, during which 64 sectors had positive results, against nine with negative results and one turning in a flat 0.00% reading, neither a gain nor a loss.

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 nine straight weeks, in which more than 60 sectors finished on the plus side each time.

All 30 of the most significantly sized sectors, as measured by the number of issuers, the collective number of issues and the total face amount of securities tracked, showed gains in the most recent week, against none showing losses. That was also an extension and a strengthening of the trend seen the previous week, when 23 of those sectors showed gains, against seven showing losses.

The biggest gainers in the latest week among those major sectors were the bonds of publishers, real estate companies, insurance carriers, paper manufacturers and lodging providers, all of which gained at least a full percentage point on the week. There were no sectors actually in the red, as noted, but metals processing turned in particularly anemic results.

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 at a new 2010 peak level, having risen from the previous Friday for a ninth consecutive week.

Publishers: from worst to first

Among the specific significantly sized sectors, the single best finisher this past week was publishing, which returned 1.28% - a gain all the more notable because during the previous week, ended Oct. 22, the publishers had the worst performance of any major sector, losing 0.94%. That losing week would seem to be an anomaly; the publishers have now been among the best finishers in three weeks out of the last four.

Real estate companies rose by a robust 1.16%; like the publishers, real estate had also been among the big losers the prior week (down 0.78%) but have now been among the elite finishers in three weeks out of the last four.

Also showing strength were insurance carriers (up 1.13%), papermakers (up 1.05%), lodging (up 1.04%) and transportation equipment manufacturing (up 0.88%). The insurers have now been among the top finishers two weeks in a row and in fact were the strongest major sector the prior week with a 1.58% gain. Lodging has been among the top sectors now for five straight weeks.

On the downside, as noted, no sector actually finished in the red this week, but metals processing came close, with just a 0.05% gain. Other mediocre performers were machinery and computer manufacturing (up 0.23%), coal mining (up 0.25%), metals mining (up 0.28%), automotive services (up 0.31%) and building construction (up 0.33%). The coal and machinery/computers sectors had each been among the top finishers the prior week, with gains of 0.44% and 0.36%., respectively.

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 31.14%), depository financial institutions (up 20.68%), non-depository institutions (up 18.34%), brokers and exchanges (up 15.73%), real estate (up 14.42%) and investment and holding offices (up 13.23%).

Other notable cumulative gainers among the majors with 43 weeks now in the books and nine to go on the year include the bonds of transportation equipment makers (up 16.94%), electronics manufacturers (up 16.00%), metals miners (up 14.52%), amusement (up 13.63%), chemical makers (up 12.28%), lodging (12.06%) and oil and gas exploration and production (up 12.00%).

As has been the case since mid-June, no significantly sized sectors were in the red on a cumulative basis this past week. Food stores (up 6.09%) and several sectors in the 9% range - coal mining, electric and gas services, miscellaneous retailing and automotive services - have had only relatively modest year-to-date net advances.

Key market indicator gains

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, rising by 0.582% for the period. Its year-to-date return as of Friday stood at 14.438% - up from 13.776% at the end of the previous week.

The index thus ended above the previous Friday's reading for a ninth consecutive time and established a new 2010 peak level, surpassing the old mark of 14.361%, which had been set just the previous day, Thursday. The index's low for the year was a 0.357% loss recorded in the week ended Feb. 12, 2010.

The average price of a high-yield issue covered by the Master II stood at 102.666 at Friday's close, with a yield to worst of 7.16% and a spread to worst of 595 basis points over comparable Treasuries, versus a price of 102.218, a yield of 7.31% and a spread of 608 bps at the end of the previous week.

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