Advantage Data: Utilities, instrument makers led key-sector gain last week; real estate drops

By Paul Deckelman

New York, March 1 - The high-yield market showed another gain in the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc. It rose for a 13th consecutive week, a winning streak dating back to Dec. 3.

Gaining sectors have now outpolled losing sectors in 25 weeks out of the last 29, dating back to the week ended Aug. 13.

However, the positive trend was not quite as evident as it had been in recent weeks. Some 45 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 25 ending in the red, and three sectors showing not enough statistically meaningful activity to produce any kind of results.

The results represented a notable retreat from the strength seen the previous week, ended Feb. 18, when there were 67 sectors recording positive returns, with just two ending in negative territory, one sector unchanged, showing neither a gain nor a loss, and three sectors with no results.

Some 20 out of the 30 most significantly sized sectors, as measured by the number of bond issuers, the collective number of issues tracked and their total face amount, ended in the black this week, with 10 finishing in the red. That too was a pullback from the bullish trend seen the week before, when all 30 of those sectors had positive returns, against no losses.

Electric and gas utilities led all of the major sectors this past week, followed by precision instrument manufacturers - chiefly the makers of medical devices - and paper manufacturers. On the downside, real estate had the most sizable loss, followed by amusement and lodging.

On a statistical basis, the junk market's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, was down on a Friday-to-Friday basis for the first time in 13 weeks, with setbacks seen during two sessions.

Utilities power up

Among specific significantly sized sectors, the single best finisher this past week was the electric and gas services sector, whose bonds had a 0.60% gain. It was the second straight week among the elite finishers for the utilities, which had also made it in the week ended Feb. 18 with a 0.84% return.

Precision instrument manufacturers returned 0.50% and papermakers were up 0.32%. Also posting notable gains were several financial sectors - depository institutions (up 0.30%), non-depository institutions (up 0.28%) and insurance carriers (up 0.25%). The depository institutions and the insurers had also been among the better finishers the week before, when each returned 0.64%.

On the downside, another financial group - real estate - had the biggest loss, 0.59%. Other notable decliners were amusement (down 0.37%), lodging (down 0.29%), food manufacturing (down 0.11%), business services (down 0.10%) and health care (down 0.08%).

It was the second straight week among the underachievers for business services, which had also been there the week before with a 0.27% gain, considered quite modest for what was a strongly positive week for most of the other sectors. Lodging, on the other hand, had been among the top finishers for a third straight time that previous week, with a 0.75% gain.

Refining takes lead on year

On a year-to-date basis eight weeks into 2011, bonds of most of the major-sized sectors have been strong, with 27 out of the 30 showing cumulative returns of at least two full percentage points or more, with 12 of those above 3%, one above 4% and for the first time this year, one topping 5% year to date.

That would be petroleum refining, which shows a 5.03% gain for the year so far, followed by insurance carriers (up 4.83%) and wholesale durable goods distributors (up 3.93%). They all leap-frogged amusement, the leader the three previous weeks, whose cumulative return dropped to 3.91% due to its sizable loss on the week. Depository institutions were up 3.88% on the year, followed by papermakers (up 3.71%), investment and holding offices (up 3.69%) and miscellaneous retailing (up 3.66%).

On the downside, real estate remained the worst year-to-date performer among the majors, with a 0.29% cumulative loss, the only major sector in the red year to date. Metals mining was up just 0.78%, and food manufacturing has gained 1.93%.

Key indicator hits a wall

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, fell on a week-to-week basis after having risen for 12 consecutive weeks before that, going back to early December. It lost 0.06% in the week ended Friday, versus the 0.477% advance seen the previous week.

With just four actual trading sessions during the week due to the market close for last Monday's Presidents Day holiday, losses were seen over two of those sessions this week, on Wednesday and Thursday.

With eight weeks in the books so far this year, that left the index with a total return of 3.307% as of Friday, down from 3.369% the week before. The index ended the week below the then-2011 peak level of 3.441%, set this past Tuesday, although it has moved back up again since then, establishing a new high-water mark at 3.468% on Monday.

The average price of a high-yield issue covered by the Master II finished at 103.906 at Friday's close, with a yield to worst of 6.834% and a spread to worst of 500 basis points over comparable Treasuries. That compares with a price of 104.131, a yield of 6.767% and a spread of 482 bps at the end of the previous week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.