Advantage Data: Publishing, real estate tops as major junk bond sectors rebound

By Paul Deckelman

New York, May 29 - The high-yield market got back in the black last week, according to sector-tabulated bond-performance statistics supplied to Prospect News Tuesday by Advantage Data Inc.

That data showed the sectors recovering from the sharp downturn seen the previous week, ended May 18, which had broken a string of four consecutive weeks on the upside dating back to the week ended April 20.

With the latest week's upturn, gains have now been seen in two weeks out of the last three, in five weeks out of the last six and in eight weeks out of the last 10. On a longer-term basis, there have been just three losses in the 21 completed weeks since the start of the year.

Of the 72 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 40 finished in the black last week, 25 ended in the red, two sectors were unchanged, showing neither a gain nor a loss and five other sectors did not generate sufficient activity to produce any kind of a number.

That represented a strong reversal of the overwhelmingly negative result which had been seen the previous week, when 65 sectors finished lower, only three were higher and four additional sectors showed no activity.

Mirroring the pattern seen in the overall high-yield universe, 17 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, 11 finished in the red and two others - paper manufacturing and insurance carriers - had flat 0.00% readings, signifying neither a gain nor a loss.

That also represented a sharp reversal from the prior week, when all 30 sectors had showed losses, against no gains.

Among specific major sectors in the latest week, bonds of publishing, real estate and transportation equipment manufacturing companies had the best showings.

On the downside, coal mining clearly had the steepest loss, but no other key sector was down by anywhere near the same magnitude.

Statistical indicators of general market performance were mixed overall on the week, but the market's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, was down for a third consecutive week.

Index continues retreat

The Merrill Lynch index showed junk bonds with a one-week decline of 0.245% as of the close Friday, on top of the previous week's yawning 1.55% deficit, which was by far the largest of the six weekly losses seen so far this year. They had also been down 0.019% in the week ended May 11.

The latest week's retreat left the index's year-to-date return at 4.851% on Friday, down from 5.108% a week earlier and well below the peak level for 2012 of 6.80%, established on May 7. It was the first time the index had ended a week registering under 5% since the 4.982% reading seen in the week ended April 13.

Other components of the Merrill Lynch index were also off on the week. As of Friday, the index showed an average price of 99.779, a yield to worst of 7.554% and a spread to worst of 668 basis points over comparable Treasuries, versus the previous week's price of 100.183, a yield of 7.44% and a spread of 659 bps.

Publishing, real estate gain

Back on a sector basis, Advantage Data meanwhile showed bonds of publishers and real estate companies turning in the best performance among the significantly sized sectors.

The publishers gained 0.74% on the week, with real estate just a nose behind that at 0.73%. It was a solid comeback for the latter sector, which been among the worst finishers the week before, when it lost 1.78%. However, real estate has now been among the Top Five best-performing large sectors in four weeks out of the past five, leading everybody else in two of those four weeks.

Other major sectors showing strength in the latest week included transportation equipment manufacturers (up 0.52%), automotive services companies, chiefly vehicle rental (up 0.45%), and lodging operators (up 0.42%).

On the downside, coal mining was buried alive for a second consecutive week, losing 2.87%, on top of the previous week's 2.48% cave-in.

However, none of the other major sectors in this past week's Bottom Five came anywhere near that kind of loss, including financial brokers and exchanges (down 0.33%) and the metals mining, electronics manufacturing and depository financial institutions sectors, which all lost 0.22% in the latest week.

That was a considerable improvement for the metals miners, which had in fact, recorded the biggest loss of any major sector the week before with a 2.92% collapse, and for the brokers and exchanges group as well, which had also badly underperformed the week before with a 1.65% loss.

Real estate on top for year

Twenty-one weeks into 2012, real estate - as mentioned, one of the top finishers on the week - regained its usual spot as top performer among the significantly sized sectors on a year-to-date basis (up 11.56%), grabbing that lofty perch back from building construction (up 10.92%), which had temporarily occupied the top spot the previous week, snapping a six-week real estate winning streak. Real estate has now been on top for 15 weeks out of the last 17.

Not too far back were non-depository financial institutions (up 10.21%). The depository financials (up 9.50%) and amusement (up 9.35%) also showed some year-to-date strength.

On the downside, coal mining fell further into the red on a year-to-date basis, its second consecutive big weekly loss more than doubling its 2012 red ink to 5.30% from 2.62% previously. However, it remained the only major-sized sector in negative territory for the year so far.

Others posting just relatively modest gains on a cumulative basis included metals mining (up 2.31% year to date), oil and gas exploration and production (up 3.13%) and petroleum refining (up 3.46%).

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