Advantage Data: Real estate, chemicals, amusement sectors led gains among key sectors last week

By Paul Deckelman

New York, May 3 - The high-yield market continued to convincingly build upon 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 11 weeks in a row on the upside, following four weeks before that on the downside, and the market once again continued to rebound convincingly from that slump earlier in the year.

Those 11 weeks of solid gains, dating back to the week ended Feb. 19, represent a continued return to the pattern of strength seen before the four-week losing streak, which lasted from the week ended Jan. 22 through the week ended Feb. 12, when the junk market touched its lows for the year. Before those four bad weeks, junk had started 2010 on a solidly positive note, part of a 10-week winning streak between mid-November and mid-January.

Looking at a longer timeframe, there have now been only seven downturns in the last 36 weeks and just eight in the last 42, as upside momentum accelerates.

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 real estate and insurance companies continued to post strong returns, along with such non-financial areas as chemical manufacturing, amusement and lodging.

Metals producers and financial brokerages and exchanges were among the sectors showing losses on the week.

Of the 73 broad-industry sectors into which Advantage Data currently divides its entire high-yield universe, 63 had positive returns on the week, eight had negative results and two turned in completely flat 0.00% readings, showing neither a gain nor a loss. In the previous week, ended April 23, 56 sectors finished in the black, 16 were in the red and one sector was unchanged.

Among the 30 significantly sized sectors, 25 were in positive territory in the latest week, against four negatives and one of the two aforementioned flat sectors, building construction. In the previous week, 24 sectors had finished in the black, with five in the red and the one flat sector, investment and holding offices.

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 an 11th straight week, pushing upward to establish another new peak level for 2010 so far.

Real estate leads as market rolls

The best-performing major sector on the week was real estate, which was up by 1.13%. Another strong sector, also from among the financials, was insurance carriers, which returned 0.72% on the week; the latter group has now been among the top finishers for 10 straight weeks, dating all the way back to the week ended Feb. 26, and including the previous April 23 week, when the insurers led all major sectors with a 1.13% return - the only significantly sized sector to return more than a full 1% that week.

Other notable gainers included chemical manufacturing (up 1.07%), amusement (up 1.01%) and lodging (up 0.77%).

It was a notable comeback for lodging, which had been the single worst performer among the significantly sized sectors in the April 23 week, with a 0.65% loss. The chemical makers also rebounded solidly, having been among the biggest losers in the previous week - otherwise strong for many industrial sectors - with a 0.06% loss. Lodging and amusement have each now been among the leaders in two weeks out of the last three and in three weeks out of the last four.

On the downside, metals production had the worst performance, losing 0.49%, followed by financial brokerages and exchanges, which were down 0.38%. Food manufacturing lost 0.05%, miscellaneous retailing lost 0.02%, and building construction, as mentioned, was unchanged.

Miscellaneous retailers had been among the best performers in the April 23 week, with a 0.49% gain, but the sector has now been among the worst performers in two weeks out of the last three.

Financials still top yearly results

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 18.28%), depository institutions (up 15.25%), non-depository institutions (up 11.81%), investment and holding offices (up 11.29%), brokers and exchanges (up 10.52%) and real estate (up 9.49%).

Other big cumulative gainers, with 17 weeks now in the books and 35 to go, include amusements (up 11.52%), chemical makers and lodging (both up 9.29%), oil and gas drilling (up 7.96%), transportation equipment manufacturing (up 7.46%), metals mining (up 7.07%) and electronics manufacturing (up 7.02%).

No major sector was in the red on a year-to-date basis in the latest week. Cumulative returns for food stores (up just 3.03%), precision instrument makers (up 3.23%), electric and gas services (up 3.76%), miscellaneous retailing (up 4.37%), and coal mining (up 4.38%) lagged behind all of the other major sectors.

Key market indicator hits 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 strengthen for yet another week, posting a 0.259% one-week gain as of the close on Friday to end the week with a year-to-date return of 7.167%.

That was a new week-ending high, eclipsing the old mark of 6.891%, seen the previous Friday, although it was off slightly from the absolute 2010 peak level of 7.18%, seen earlier in the 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 99.671 at Friday's close, with a yield to worst of 8.04% and a spread to worst of 576 basis points over comparable Treasuries - versus a price of 99.479, a yield of 8.01% and a spread of 563 bps at the end of the previous week.

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