Advantage Data: Lodging, insurance, other financials led gains among key sectors last week

By Paul Deckelman

New York, March 15 - The high-yield market added to its recent gains in the week ended Friday, according to statistics supplied to Prospect News by Advantage Data Inc., as junk industry sector returns made it four consecutive weeks on the upside, following four weeks before that on the downside.

With the gains, the market continued to rebound convincingly from the lows to which it had slid around the middle of February.

The four weeks of solid gains represent a definitive return to the pattern of strength seen before the four-week losing streak that lasted from the week ended Jan. 22 through the week ended Feb. 12. Prior to those four bad weeks, junk had put together a 10-week winning streak, which dated from mid-November through mid-January.

Looking at a longer timeframe, there have now been only seven downturns in the last 29 weeks and just eight in the last 35, as momentum has clearly shifted back toward the upside.

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 securities tracked - bonds of lodging companies, insurance carriers, other financials such as depositary and non-depositary institutions and brokers and exchanges, and petroleum refiners turned in the strongest showings.

Just one major sector - business services - was in the red, and just barely so, although bonds of food store operators and precision instrument manufacturers also had notably small returns relative to everyone else.

Of the 73 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 68 had positive returns and only five had negative results on the week, a continuation of the trend seen in the previous week, ended March 5, when 70 sectors had finished in the black and just two were in the red.

Among the significantly sized sectors, 29 were in positive territory in the latest week, against just one negative, as noted, continuing a trend seen the previous week when all 30 sectors showed gains against no losses, the second such clean sweep in three weeks.

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, continued to improve for a fourth straight week, pushing upward to establish a new peak level for 2010 so far.

Lodging, insurance lead the way

The best-performing major sector on the week was lodging, which posted a 2.77% return, followed by insurance carriers, up 2.65%. The insurance sector has now been among the top finishers for three consecutive weeks, including in the March 5 week, when it led all significant sectors with a 1.64% return.

Other financial sectors were also strong this past week, such as depository institutions (up 1.54%), brokers and exchanges (up 1.19%), non-depository institutions and investment and holding offices (up 1.17%) and real estate (up 1.09%). Investment and holding was also among the previous week's leaders, with a 1.29% gain. Among the non-financials, petroleum refining (up 1.39%) and amusements (up 1.08%) were strong this past week.

On the downside, just one major sector finished in the red - business services, as noted, down 0.02%. Other sectors showing only weak positive returns included food stores (up 0.12%), makers of precision instruments - chiefly medical devices - (up 0.31%) and metals mining (up 0.35%).

Food stores and precision instruments had each been among the weak finishers the week before as well, when they had very modest returns of just 0.61% and 0.36%, respectively. The precision instruments grouping has now been among the weakest performers in three weeks out of the last four.

Financials tops for year

On a year-to-date basis so far, financial sectors continue to show the strongest performance among the significantly sized sectors, led by insurance carriers (up 11.18%), depository institutions (up 8.30%), non-depository institutions (up 6.72%), investment and holding offices (up 6.48%) and brokers and exchanges (up 5.48%).

Other big cumulative gainers, with 10 weeks now in the books and 42 to go, include amusements (5.85%), metals mining (up 5.11%), oil and gas drilling (up 4.78%), electronics manufacturing (up 4.27%), chemical makers (up 3.98%) food manufacturing (up 3.58%) and transportation equipment manufacturing (up 3.54%).

No major sector was in the red on a year-to-date basis in the latest week. Business services (up 0.90%), food stores (up 1.37%), miscellaneous retailing (up 1.39%), publishing (up 1.44%) and health care (up 1.65%) lagged behind all of the other major sectors.

Key market indicator at new high

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, continued to put their February lows ever farther behind them, posting a 0.937% one-week gain as of the close on Friday to end the week with a year-to-date return of 3.775%, a new peak level for the year.

That eclipsed the old 2010 week-ending peak of 2.811%, seen at the close of the previous week. The index's low for the year had been a 0.357% loss recorded the week ended Feb. 12.

The average price of a high-yield issue covered by the Master II stood at 97.373 at Friday's close, with a yield to worst of 8.55% and a spread to worst of 623.987 basis points over comparable Treasuries - versus a price of 96.609, a yield of 8.75% and a spread of 646.002 bps at the end of the previous week.

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