Advantage Data: Real estate, metal miners best as junk sectors rebound

By Paul Deckelman

New York, June 11- The high-yield market continued its recent choppy performance pattern last week, getting back in the black after having slid into the red the week before, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That data reported that a majority of the sectors showing gains, after having fallen the previous week, ended June 1. That, in turn had followed several alternating weeks of gains and losses.

With the latest week's rise, gains have now been seen in two weeks out of the last three and in three weeks out of the last five. On a longer-term basis, there have been just four losses in the 23 completed weeks since the start of the year, versus 19 advances.

Of the 73 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 51 finished in the black last week, 17 ended in the red, one sector was unchanged, and four other sectors did not generate sufficient activity to produce a number.

That represented a solid turnaround from the deterioration which had been seen in the previous week, when 49 sectors finished lower, 18 were higher, one sector had a flat 0.00% reading and four additional sectors showed no activity. In the interim, Advantage Data added one sector to its roster, bringing the total number to 73 from 72 the previous week.

Mirroring the pattern seen in the overall high-yield universe, 26 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 and only four finished in the red.

That also represented a major comeback from the prior week, when 23 sectors had showed losses, against just seven gains.

Among specific major sectors in the latest week, bonds of real estate companies and metal miners had the best showings, each gaining more than 1 full percentage point. .

On the downside, coal mining concerns and paper manufacturers did the worst.

Statistical indicators of general market performance were up across the board on the week, including the total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, which broke out of a four-week slump.

Index bounces back

The Merrill Lynch index showed junk bonds with a one-week gain of 0.504% as of the close Friday, in contrast to the previous week's 0.448% loss. It was the first such weekly gain in five weeks, since the week ended May 4. There have been seven weekly losses so far this year, against 16 gains.

The latest week's advance lifted the index's year-to-date return to 4.974% on Friday, up from 4.448% a week earlier. However, it remained well below the peak level for 2012 of 6.80%, established on May 7.

As of Friday, the index showed an average price of 99.082, a yield to worst of 7.835% and a spread to worst of 699 basis points over comparable Treasuries, versus the previous week's price of 98.732, a yield of 7.945% and a spread of 718 bps.

Real estate leads rally

Back on a sector basis, Advantage Data meanwhile showed bonds of real estate companies turning in the best performance among the significantly-sized sectors, with a 1.17% gain. It was real estate's third consecutive week among the elite finishers, having also been there the week before with a 0.21% gain and a 0.73% rise the week before that, ended May 25.

Metals mining companies (up 1.06%), precision instrument manufacturers, chiefly medical device makers (up 0.85%), miscellaneous retailers (up 0.62%) and telecommunications operators (up 0.57%) also showed strength during the week.

It was a good comeback for the retailers, who had been among the Bottom Five worst-performing sectors the week before, when the group lost 0.73%

On the downside, coal mining companies lost 0.31%, the worst among the significantly-sized sectors. It was coal's fourth straight week among the worst performers; the week before, the group had lost 0.63%.

Also among the underachievers were paper manufacturing (down 0.24%), publishing (down 0.15%), insurance carriers (down 0.05%), and machinery and computer manufacturing, which posted a minuscule 0.02% gain.

That was a comedown for the papermakers and the insurance carriers, which had each been among the Top Five finishers the week before with gains of 0.10% and 0.31% respectively. In fact, the insurers had led all the significantly-sized sectors in the June 4 week.

Real estate back on top

Twenty-three weeks into 2012, real estate regained its crown as the best-performing major sector on a year-to-date basis, with a 12.56% return. That let it leapfrog building construction, the previous week's leader, which showed a 10.24% cumulative return in the latest week. It was the second time in three weeks real estate was on top, and on a longer-term basis, the 16th week out of the past 19.

Not too far back were depository financial institutions (up 9.69%) and non-depository institutions (up 8.24%), automotive services (up 8.23%) and amusement (up 8.06%).

On the downside, coal was the only major-sized sector in negative territory for the year so far, showing a 6.66% loss.

Others posting just relatively modest gains on a cumulative basis included oil and gas exploration and production (up 2.53%), petroleum refining (up 3.44%) and metals mining (up 3.49%).

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