Advantage Data: Real estate, telecom best as major junk sector rebound continues

By Paul Deckelman

New York, June 18- The high-yield market made it two successive weeks on the upside last week, as junk continued its rebound after having slid into the red the week before that - part of a recently choppy performance pattern, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That data showed a majority of the sectors showing gains. Since about mid-May, junk had seen several alternating weeks of gains and losses.

But with the latest week's rise, gains have now been seen in three weeks out of the last four, in four weeks out of the last six and in seven weeks out of the last 10. On a longer-term basis, there have been just four losses in the 24 completed weeks since the start of the year, versus 20 advances.

Of the 73 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 62 finished in the black last week, just eight ended in the red and three other sectors did not generate sufficient activity to produce any kind of a number.

That represented a continuation and a strengthening of the positive trend seen the previous week, ended June 8, when 51 sectors finished higher, 17 closed lower, one sector was unchanged, showing neither a gain nor a loss, and four additional sectors showed no activity.

Mirroring the pattern seen in the overall high-yield universe, 27 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 three finished in the red.

That also represented a continuation of the trend seen the prior week, when 26 of those sectors had showed gains, against just four losses.

Among specific major sectors in the latest week, bonds of real estate companies and telecommunications operators had the best showings, with real estate up by more than 1 full percentage point for a second straight week.

On the downside, petroleum refiners and coal miners 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 posted its second straight weekly gain, as it continued to recover from a recent four-week slump.

Index extends gains

The Merrill Lynch index showed junk bonds with a one-week gain of 0.394% as of the close Friday, on top of the previous week's 0.504% advance, which had been the first seen since the week ended May 4. There have been seven weekly losses so far this year, against 17 gains.

The latest week's advance lifted the index's year-to-date return to 5.387% on Friday, up from 4.974% a week earlier. However, it remained well below the peak level for 2012 of 6.80%, established on May 7.

Other components of the Merrill Lynch index also showed improvement on the week. As of Friday, the index showed an average price of 99.323, a yield to worst of 7.696% and a spread to worst of 690 basis points over comparable Treasuries, versus the previous week's price of 99.082, a yield of 7.835% and a spread of 699 bps.

Real estate again leads

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 1.10% gain. It was real estate's second consecutive week leading all of the major sectors, having also been on top in the week ended June 8 with a 1.17% gain. It was also the sector's fourth straight week overall among the elite finishers, dating back to the week ended May 25.

Telecommunications companies (up 0.72%), depository financial institutions (up 0.68%), metals mining companies (up 0.67%) and the electronics manufacturing and miscellaneous retailing sectors (each up 0.61%) also showed strength during the week.

It was it was the second straight week among the best performers for telecom, the metals miners and the retailers, each of whom had been among the Top Five finishers the week before with returns of 0.57%, 1.06% and 0.62%, respectively.

On the downside, petroleum refining companies lost 0.63%, the worst among the significantly sized sectors.

Coal mining concerns fell by 0.43%, marking coal's fifth straight week among the weakest performers; the week before, the group had in fact been the worst among all of the significantly sized sectors with a 0.31% loss.

Metals processing companies were down by 0.10%. Those were the only key sectors finishing in the red this past week, while two other groupings - wholesale durable goods distributors (up 0.04%) and lodging (0.11%) - rounded out the Bottom Five list of the underachievers by posting only anemic gains.

Real estate tops for year

Twenty-four weeks into 2012, real estate remains the best-performing major sector on a year-to-date basis, with a 12.80% cumulative return, its second consecutive week in the top spot and on a longer-term basis, the 17th week out of the past 20.

Building construction - which had temporarily displaced real estate as the year-to-date leader in the week ended June 1 - remained in its more usual second-place spot for a second straight week, with a 10.88% gain on the year.

Not too far back were depository financial institutions (up 9.52%), insurance carriers (up 8.74%) and non-depository institutions (up an even 8%).

On the downside, coal was the only major-sized sector in negative territory for the year so far, showing a 4.32% loss.

Others posting just relatively modest gains on a cumulative basis included metals mining (up 2.51%), oil and gas exploration and production (up 2.92%) and petroleum refining (up 3.24%).

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