Advantage Data: Real estate sector outperforms amid continued junk market major-sector rally

By Paul Deckelman

New York, Jan. 23 - The high-yield market scored a hat trick last week, notching its third straight advance for the new year and its eighth weekly gain overall. The market thus continued the same kind of robust performance in the first weeks of 2012 with which it had ended 2011, as a large majority of industry groupings showed gains last week, according to sector-tabulated bond-performance statistics supplied to Prospect News by Advantage Data Inc.

Of the 73 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 65 finished in the black last week, only five sectors were in the red, and three others did not show enough statistically meaningful activity to produce any kind of results.

That continued the bullish trend seen the week before, ended Jan. 13, when 63 sectors posted gains, just five had negative results, one was completely unchanged, showing neither a gain nor a loss, and four others produced no results.

Among 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 - 27 of them ended in the black in the latest week, with only three in the red, continuing the trend from the prior week, when 28 of those sectors had shown positive results, with one having a negative result and the other sector unchanged on the week.

Among specific major sectors in the latest week, bonds of real estate firms topped the list, while building construction companies and financial brokers and exchanges were also among the biggest gainers.

On the downside, just three sectors - publishing, electric and gas services providers and insurance carriers - actually posted losses, while several others had only relatively small gains in an otherwise largely positive week.

Looking at statistical indicators of overall market performance, junk's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, ended the week on Friday higher for a fifth straight week.

Key measure advances again

Junk bonds, as measured by the Merrill Lynch index, had a one-week gain of 0.578% for its fifth consecutive weekly advance. The week before had seen a 0.311% return.

The latest gain lifted its year-to-date return to 1.662% at the close Friday versus 1.077% the prior week. Friday's finish was also the peak level for 2012 so far, eclipsing the 1.601% high-water mark, set just the session before.

With the latest week's advance, the index has shown positive finishes in seven of the last 10 weeks, including in seven weeks out of the last eight, as the junk market continues to rebuild the strong momentum which high yield had generated during the first half of last year, but which had then been only sporadically present for much of the second half.

Other components of the Merrill Lynch index also firmed on the week. As of Friday, the index showed an average price of 99.295, a yield to worst of 7.801% - and a spread to worst of 683.697 basis points over comparable Treasuries - the first time the spread has closed out a week below 7% since the end of October - versus a price of 98.873, a yield of 7.99% and a spread of 710 bps at the end of the previous week.

Real estate rises most

Back on a sector basis, Advantage Data meanwhile showed bonds of real estate companies having the best performance of any significantly sized sector last week, when they gained 2.04%. It was the third straight finish among the elite finishers for real estate, which had notched a 1.43% gain the week ended Jan. 13 and which had risen 0.93% the week before that.

Other top performers this past week were building construction (up 1.46%), financial brokers and exchanges (up 1.09%), lodging (up 1.07%) and electronics manufacturing (up 0.93%).

Like real estate, it was the third straight week among the strongest finishers for building construction, which in fact had led all major sectors in each of those previous two weeks, with returns of 2.35% in the Jan. 13 week and 1.10% in the week ended Jan. 6.

On the downside, publishing posted the only sizable loss on the week among the large sectors - down 0.88% - and was one of just three sectors actually in the red; the others were electric and gas services (down 0.02%) and insurance carriers (down 0.01%). Rounding out the Bottom Five were pair of sectors which merely had much smaller gains than all of the others, oil and gas exploration and production (up 0.11%) and non-depository financial institutions (up 0.16%).

It was the second straight week among the underachievers for the oil and gas producers. On the other hand, the insurance carriers had been among the best finishers the week before.

Construction tops on year

On a year-to-date basis three weeks into 2012, building construction remains the top performer so far with a 5.05% return, on the strength of its three straight Top Five finishes, including the two consecutive weeks when it was the top finisher among the major sectors.

Also showing strength so far have been the other three-time winner and the week's top finisher, real estate (up 4.79%), metals processors (up 2.77%), brokers and exchanges (up 2.72%) and wholesale durable goods distributors (up 2.43%).

Publishing, the week's big loser, became the first sector falling into the red so far this year, with a 0.11% cumulative loss. Food stores and electric and gas utilities (both up 0.52%) and non-depository financial institutions (up 0.72%) lag the other groupings, all of which have returned at least 1.00% or more on the year to date.

© 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.