Advantage Data: Publishing, lodging on top as junk major sectors rebound from downturn

By Paul Deckelman

New York, April 23 - The high-yield market got back in the black last week after having retreated the week before, according to sector-tabulated bond-performance statistics supplied to Prospect News Monday by Advantage Data Inc.

That downturn the previous week had been the first after four straight weeks before that on the upside.

On a somewhat longer-term basis, the market measure has now finished on the plus side during eight weeks out of the last 10.

Of the 72 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 62 finished in the black last week and just seven sectors were in the red; three other sectors did not have sufficient activity for any kind of a number.

That was a massive improvement over the week before, ending April 13; during that week, 40 sectors finished lower, 29 better, one sector was flat, showing neither a gain nor a loss on the week, and two other sectors showed no activity.

Mirroring the renewed strength seen among the overall high-yield universe, all 30 of the 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, with none in the red. The week before, 19 of those major sectors had posted losses, 10 ended with gains and one sector - machinery and computer manufacturing - was unchanged on the week.

Among specific major sectors in the latest week, bonds of publishing, lodging and automotive services companies turned in the best performances.

There was no downside as such, with all of the key sectors finishing in the black, but several, such as electric and gas services and depository financial institutions, recorded only weak finishes.

Statistical indicators of overall market performance pointed higher 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 up on the week, after having retreated the week before.

Index turns positive

The Merrill Lynch index showed junk bonds with a one-week rise of 0.376% as of the close Friday, versus the previous week's decline of 0.174%, which had followed two straight weeks of gains.

The latest week's advance lifted the index's year-to-date return to 5.337% on Friday, up from 4.942% a week earlier, although the cumulative return remained below 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 better on the week. As of Friday, the index showed an average price of 101.02, a yield to worst of 7.2% and a spread to worst of 626 basis points over comparable Treasuries, versus the previous week's price of 100.787, a yield of 7.32% and a spread of 635 bps.

Publishers pop up

Back on a sector basis, Advantage Data meanwhile showed bonds of publishers having the best performance in the latest week among the significantly sized sectors, with a 0.83% return.

Other major sectors showing strength last week included lodging (up 0.61%), automotive services - chiefly vehicle-rental companies - (up 0.54%), electronics manufacturing (up 0.46%) and chemical manufacturing (up 0.44%).

Ironically, auto services had been among the worst performers the week before, when it fell by 0.27%.

With all of the major sectors ending on a positive note last week, there was no downside as such in the latest week - only some sectors which finished with smaller returns than their peers.

Electric and gas services and depository financial institutions had the most anemic returns, each up by only 0.08%. Other underachievers included real estate (up 0.19%) and the insurance carrier and oil and gas exploration and production sectors, which were up by 0.21% each.

The week before, the insurers had been among the best performers, with a 0.14% gain.

Real estate retains lead

Sixteen weeks into 2012, real estate remained in the top spot in terms of year-to-date returns among the significantly sized sectors for a third consecutive week, registering a 10.95% gain. The sector has now been the top cumulative performer in 11 out of the last 12 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 third straight week, with a 10.45% return.

Building construction held third place with a 9.37% year-to-date return. Also showing strength were amusement (up 8.30%), non-depository financial institutions (up 7.87%), wholesale durable goods distributors (up 7.78%) and brokers and exchanges (up 7.43%).

On the downside, coal mining showed a 1.05% cumulative loss for the year, the only major-sized sector in the red. Others posting only relatively modest gains on a cumulative basis included oil and gas exploration and production (up 3.34%) and petroleum refining (up 3.48%).

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