Advantage Data: Food stores, lodging led key-sector surge last week, real estate retreats

By Paul Deckelman

New York, May 9 - The high-yield market posted its seventh consecutive gain in the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

Those gains represent a continuation of the pattern of strength seen in the sector breakdowns for most of this year; after advances were recorded in each of the first nine weeks of this year - part of a 14-week winning streak that dated all the way back to Dec. 3 - that streak was snapped by negative results over two weeks in mid-March. However, the sectors rebounded later that month and have been on the rise ever since then.

Continuing the trend of solidly, and frequently overwhelmingly positive results most weeks, a pattern interrupted only by that two-week sojourn, some 64 of the 75 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 six sectors ending in the red and another five showing not enough statistically meaningful activity to produce any kind of results - identical numbers to the week before, ended April 29, although some of the actual sectors involved were different.

And as had been the case in that previous week, 29 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 only one - real estate - finishing in the red. In the previous week, publishing had been the sole sector showing a loss on the week.

Among specific sectors, bonds of food stores, lodging and providers of electric and gas services showed notable strength in the latest week. On the downside, besides sole loser real estate, some other sectors, like coal mining and miscellaneous retailers, turned in particularly anemic positive returns.

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, rose on a Friday-to-Friday basis versus the previous week's cumulative return for a seventh straight week.

Food stores firm up

Among specific significantly sized sectors, the best-performing sector this past week was the food stores group, whose bonds returned 0.74%. The sector has now been among the top finishers for three straight weeks, having posted gains of 0.85% and 0.34% in the weeks ended April 29 and April 22, respectively.

That was followed in the latest week by lodging (up 0.71%), electric and gas services (up 0.55%), insurance carriers (up 0.54%), amusement (up 0.50%) and automotive services - chiefly vehicle rental - which was up 0.46%.

It was the second straight week among the top finishers for lodging, utilities, automotive services and the insurers, with the latter sector having actually been the best performer in the week ended April 29, when it gained 0.88%. The utilities have now also been among the best performers in three weeks out of the last four, although just before that, the volatile sector had been among the worst performers for three consecutive weeks.

On the downside, real estate lost 0.09%, and, as noted, was the only sector actually finishing in the red this past week. It had also been among the weakest finishers the week before with a paltry 0.20% return during an otherwise generally strong week.

Several other sectors with particularly weak positive showings included coal mining (up just 0.05% for a second straight week), miscellaneous retailers (up 0.17%), the health care and the oil and gas exploration and drilling sectors (both up 0.19%) and financial brokers and exchanges (up 0.20%).

Insurance carriers in lead

On a year-to-date basis 18 weeks into 2011, bonds of most of the major-sized sectors have been strong, with 28 out of the 30 showing cumulative returns of at least three full percentage points, including five above 6% year to date, 15 others topping 5% and six more above 4%.

Bonds of insurance carriers had the best cumulative return at 6.96%, followed by the week's best finisher, food stores (up 6.77%) and petroleum refining (up 6.51%). They leap-frogged the previous week's leader, depository financial institutions, which returned 6.33% for the year this past week. Amusement was up 6.14% on the year.

On the downside, metals mining had a relatively weak 2.35% year-to-date return, followed by real estate (2.72%), publishing (up 3.36%) and automotive services (up 3.78%).

Key indicator gains continue

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, had a one-week return as of Friday of 0.310%, on top of the previous week's 0.445% gain. That lifted the index to a total return of 5.777% as the week ended - a new peak level for 2011 - up from 5.45% at the end of the previous week.

As of Friday, the index showed an average price of 104.484, a new high for the year, a yield to worst of 6.718%, and a spread to worst of 505 basis points over comparable Treasuries, versus a price of 104.463, a yield of 6.685% - its lowest point for the year so far - and a spread of 499 bps at the end of the previous week.

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