Advantage Data: Electronics makers, insurance carriers led major-sector surge last week

By Paul Deckelman

New York, Sept. 27 - The high-yield market showed gains for a sixth 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 Sept. 17.

The gaining sectors have now outpolled losing sectors in seven weeks out of the last eight and in 13 weeks out of the last 15.

Some 61 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 12 ending in the red. That was a pullback, though only a slight one, from the firming trend seen in the previous week, when 66 sectors had showed positive returns and only six posted losses.

Even so, lopsided positive-sector breakdowns have been seen over most weeks since around the second week in July, including one stretch of five straight weeks which had more than 60 sectors finishing in the black each time.

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, also saw a continuation of their recent pattern of strength, with 25 sectors showing gains against five relatively small losses, just a little bit easier than the previous week's clean sweep of all 30 sectors finishing in the black against none ending in the red.

The biggest gainers in the latest week among those major sectors were the bonds of electronics manufacturers and such financial groups as insurance carriers, real estate companies and non-depository institutions. Bonds of lodging companies did the worst among the major sectors, followed by automotive services and chemical manufacturers.

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 fourth consecutive week, and established another new 2010 peak level during the week.

Electronics power up

Among the specific significantly sized sectors, the single best finisher this past week was electronics manufacturing, which returned 0.79%, barely edging out insurance carriers, which gained 0.78%.

It was the second big finish in a row for the insurers, which in the week ended Sept. 17 had been the best-performing major sector with a 1.73% return.

Several other financial sectors were also among the top finishers in the latest week - real estate (up 0.60%), now among the elite group for four straight weeks, having finished the week before up 1.06%, and non-depository financial institutions (up 0.54%). The latter sector had also been among the big winners the week before, when it gained 1.11%.

Others to show notable strength included business services (up 0.59%) and paper manufacturing (up 0.53%). Both had also been among the top finishers in the Sept. 17 week, when business services gained 1.05% and the papermakers rose by 1.69%, rebounding after having been the absolute worst major sector in the previous week, ended Sept.10, with a 0.07% loss, the only significantly sized sector to have ended in the red that week. Paper has now been among the big gainers in four weeks out of the last five.

On the downside, lodging had the worst loss among the major sectors, down 0.33%, followed by chemical manufacturing and automotive services (both down 0.13%), miscellaneous retailing (down 0.09%) and electric and gas services (down 0.01%). Food manufacturing and amusement both gained a meager 0.04% on the week.

Financials top yearly results

As has been the case for much of the year, financial sectors for the most part 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 24.55%), depository financial institutions (up 19.44%), non-depository institutions (up 16.32%), real estate (up 10.66%), brokers and exchanges (up 10.37%) and investment and holding offices (up 9.23%).

Other notable cumulative gainers among the majors with 38 weeks now in the books and 14 to go include the bonds of the week's top finisher, electronics manufacturing (up 12.67%), transportation equipment manufacturing (up 12.25%), metals mining (up 11.08%), oil and gas exploration and production (up 9.93%), food manufacturers (up 9.83%), amusement (up 9.77%), metals processing (up 9.27%), telecommunications (up 9.11%) and machinery and computer makers (up 9.06%).

No significantly sized sectors were in the red on a cumulative basis this past week. Food stores (up 5.01%), publishing (up 6.18%) and automotive services (up 6.21%) 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 new high points for the year.

The index rose by 0.254% on the week, and its year-to-date return as of Friday stood at 11.05% - up from 10.769% at the end of the previous week and just below the new high point for the year so far of 11.117%, set this past Tuesday, Sept. 21. 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 100.293 at Friday's close, with a yield to worst of 7.80% and a spread to worst of 643 basis points over comparable Treasuries, versus a price of 100.193, a yield of 7.81% and a spread of 635 bps at the end of the previous week.

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