Advantage Data: Precision instruments, petroleum big losers as junk major-sectors revival fizzles

By Paul Deckelman

New York, April 16 - The high-yield market posted an overall loss after having gained in the previous four weeks, according to sector-tabulated bond-performance statistics supplied to Prospect News by Advantage Data Inc. On a somewhat longer-term basis, it was the second time in the last 10 weeks that market measure has finished in the red.

Of the 72 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 40 finished in the red last week and 29 sectors were in the black; one sector was flat, showing neither a gain nor a loss on the week, while two other sectors did not have sufficient activity for any kind of a number.

That was a pronounced reversal from the week before, ending April 6; during that week, 37 sectors finished out the week higher, 32 lower, and one other sector traded flat. In the interim, Advantage Data subsequently recalibrated its index, adding two previously dropped sectors to raise the total number tracked to 72 from the prior week's 70.

Mirroring the erosion of strength seen among the overall high-yield universe, 19 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 red, against 10 in the black and the one flat sector - machinery and computer manufacturing - which was unchanged on the week.

The week before, 16 of those major sectors had posted gains, 13 ended with losses and one sector - investment and holding offices - was unchanged on the week.

Among specific major sectors in the latest week, bonds of precision instrument manufacturers - chiefly medical device makers - and petroleum refiners had the worst showing.

On the upside, non-depository financial institutions and coal mining concerns turned in the best performances.

Statistical indicators of overall market performance pointed lower on the week; the market's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, was lower on the week, after two previous weeks showing advances.

Index turns negative

The Merrill Lynch index showed junk bonds with a one-week decline of 0.174% as of the close Friday, versus the previous week's 0.025% rise, which had been its second consecutive weekly gain.

The latest week's loss left the index's year-to-date return at 4.942% on Friday, down from 5.126% a week earlier and down as well from its peak level for the year so far, 5.361%, seen on Friday, March 2, which was also the highest level the index had hit since early last August.

Other components of the Merrill Lynch index were also lower on the week. As of Friday, the index showed an average price of 100.787, a yield to worst of 7.32% and a spread to worst of 635 basis points over comparable Treasuries, versus the previous week's price of 101.144, a yield of 7.25% and a spread of 616 bps.

Precision instruments punished

Back on a sector basis, Advantage Data meanwhile showed bonds of medical device makers and other precision instrument manufacturers having the worst performance in the latest week among the significantly sized sectors, with a 0.39% loss. Petroleum refiners weren't much better, with a deficit of 0.34% on the week.

Other underachievers included miscellaneous retailers (down 0.28%), automotive services (down 0.27%) and transportation equipment manufacturing (down 0.25%).

On the upside, several of the week's better performers showed solid rebounds versus the week before, when they had been among the Bottom Five worst finishers.

These included non-depository financial institutions, which did the best of any major sector with a 0.26% gain'; the week before, it had been among the worst large sectors with a 0.55% loss.

Coal mining was up a relatively robust 0.25%, while the week before, it had been among the worst laggards for a sixth straight week and was, in fact, the worst of the worst that week with 0.75% of red ink. Metals processors (up 0.12%) had also been among the names at the bottom the week before, when they had a 0.28% loss.

Rounding out the week's Top Five major-sector names were insurance carriers (up 0.14%) and financial brokers and exchanges (up 0.10%). The insurers were in that elite group for a second straight week, and, in fact had been the previous week's single-best major-sector with a 0.23% rise at that time.

Real estate retains 2012 lead

Fifteen weeks into 2012, real estate remained in the top spot in terms of year-to-date returns among the significantly sized sectors for a second consecutive week, registering a 10.47% gain. The sector has now been the top cumulative performer in 10 out of the last 11 weeks, a winning streak just briefly interrupted when depository financial institutions surged ahead in the week ended March 30, only to fall back the following week. Last week, the depository financials were in second place for a second straight week, with a 10.16% return.

Building construction held third place with a 10.12% year-to-date return. Also showing strength were amusement (up 7.80%), brokers and exchanges (up 7.38%), and the non-depository financials and durable goods distributors (both up 7.15%).

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