Advantage Data: Publishing, real estate led major-sector slide last week; food firms led gainers

By Paul Deckelman

New York, July 6 - The high-yield market was noticeably lower in the week ended Friday, according to industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

The downturn broke a two-week winning streak during which strong gains had been seen. However, the count of advancing sectors has still now outpolled the losing sectors in four weeks out of the last six.

Fully 49 of the 72 broad-industry sectors into which Boston-based Advantage Data divides its entire high-yield universe finished in the red in the latest week, with 22 ending in the black and one - textile manufacturing - unchanged, showing neither a gain nor a loss. That was a sharp reversal from the show of overwhelming strength seen in the previous week, ended Friday June 25, when 66 of the sectors tallied that week ended in positive territory, against just six showing negative results.

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, 25 of the sectors finished in the red versus just five which ended in the black.

That was a major deterioration from the week before, when 29 sectors had gains and just one - real estate - recorded a loss, continuing an overwhelmingly positive trend which had actually seen a 30-0 clean sweep among the significant sectors in the week ended June 18.

The biggest losers in the latest week among those major sectors were the bonds of publishing and real estate companies, as well as several service-oriented sectors - business services, lodging and amusement. Among the few significant sectors finishing in the black were food manufacturing and precision instrument manufacturing.

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, was in retreat after two straight weeks on the upswing, which in turn had followed falling readings at the end of the two weeks before that.

Publishing gets pummeled

Among the specific significantly sized sectors, the single worst finisher this past week was publishing, which plunged by 2.54% - a drastic comedown from the week before, when the group had also been among the weakest performers but managed to eke out an anemic 0.10% gain.

Other big losers this past week were real estate (down 1.72%), business services (down 1.48%), lodging (down 1.23%), amusement (down 1.09%) and paper manufacturing (down 0.93%). In the previous week, real estate had been the single worst finisher among the key sectors and was in fact the only such sector finishing in the red that week, as it lost 0.75%. Business services had also been among the laggards, with just a 0.01% return.

Only a handful of significantly sized sectors finished in the black this past week, and only two of them -food manufacturing (up 0.37%) and precision instrument manufacturing (up 0.25%) - posted anything even resembling real gains.

Sectors just barely finishing in positive territory were metals mining (up 0.05%), insurance carriers (up 0.03%) and food stores (up 0.02%).

The week before, the precision instrument makers - chiefly medical device producers - had been among the stronger finishers with a 0.59% gain. Metals mining had done even better (up 0.87%), while insurance carriers (up 0.54%) had also done well. Food stores had meantime been among the weak finishers with a 0.03% gain.

Financials top yearly results

On a year-to-date basis so far, financial sectors for the most part continue to show the strongest performance among the significantly sized sectors - although they remain somewhat below their peak levels seen earlier in the year - led by insurance carriers (up 12.58%), depository financial institutions (up an even 12%), non-depository institutions (up 10.20%), investment and holding offices (up 7.98%), real estate (up an even 5%) and brokers and exchanges (up 4.77%).

Other notable cumulative gainers at the year's halfway mark, with 26 weeks now in the books and 26 to go, include amusements (up 7.21%), chemical manufacturing (6.68%), metals mining (up 6.60%), transportation equipment manufacturing (up 6.31%), lodging (up 5.54%), and food manufacturing (up 5.37%).

Two significantly sized sectors slipped into the red on a year-to-date basis - the week's biggest loser, publishing (down 0.27% on the year) and another underperformer on the week, business services (down 0.13%). Miscellaneous retailing (up just 1.84%), electric and gas services (up 1.97%) and paper manufacturing (up 2.20%) had relatively small year-to-date net gains.

Key market indicator pushed back

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, retreated after having posted gains for the previous two consecutive weeks.

The index was down by 0.271% on a one-week basis as of the close Friday to end the week with a year-to-date return of 4.631%, down from 4.916% at the close the previous Friday, June 25. The index also remains considerably below its week-ending high for the year, 7.167%, seen on Friday, April 30, and below the absolute 2010 peak level of 7.18%, seen earlier that same week. The index's low for the year was 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 95.809 at Friday's close, with a yield to worst of 9.07% and a spread to worst of 717 basis points over comparable Treasuries, versus a price of 96.242, a yield of 8.88% and a spread of 697 bps at the end of the previous week.

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