Advantage Data: Machinery, computer makers lead amid junk major-sector rise; food stores falter

By Paul Deckelman

New York, July16- The high-yield market scored its sixth successive weekly gain last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That data once again showed a majority of the sectors notching gains. High yield thus continued to move up after breaking out of a recent choppy performance pattern which had seen alternating weeks of gains and losses over a period of more than a month, starting around mid-May and going into mid-June.

With the latest week's rise, gains have now been seen in six weeks out of the last seven, in seven weeks out of the last eight and in eight weeks out of the last 10. On a longer-term basis, there have been just four losses in the 28 completed weeks since the start of the year, versus 24 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, 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 of the positive trend seen the previous week, ended July 6, when 65 sectors finished higher, only five closed lower and three additional sectors showed no activity.

Mirroring the overwhelmingly positive 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, with just three in the red, pretty much continuing the strong trend seen over the two previous week, when 29 of those sectors rose and only one fell, in both of those weeks.

Among specific major sectors in the latest week, bonds of machinery and computer manufacturers and depository financial institutions turned in the strongest performances this past week, while the food stores sector was the single worst finisher.

Statistical indicators of general market performance were mostly higher 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 sixth straight weekly gain and hit a new high level for the year during the week.

Index extends gains

The Merrill Lynch index showed junk bonds with a one-week gain of 0.202% as of the close Friday, on top of the previous week's 0.551% advance. There have been seven weekly losses so far this year, against 21 gains.

The latest week's rise lifted the index's year-to-date return to 7.86% on Friday, up from 7.643% a week earlier. That was slightly off from the highest reading for the year to date, the 7.94% seen on Wednesday.

The recent index levels are the highest seen in some 18 months - since the 15.19% year-to-date return notched back on Dec. 31, 2010. The index had finished 2011 with a 4.383% return, and its highest reading last year was 6.362%, recorded on July 26, 2011.

Other components of the Merrill Lynch index also showed improvement on the week. As of Friday, the index showed an average price of 100.929, a yield to worst of 7.236% and a spread to worst of 652 basis points over comparable Treasuries, versus the previous week's price of 100.877, its yield of 7.265% and its spread of 653 bps.

Machinery makers move up

Back on a sector basis, Advantage Data meanwhile showed bonds of machinery and computer manufacturers as the top finishers among the significantly sized sectors, with a 0.86% gain on the week, followed by depository financial institutions (up 0.80%), automotive services (up 0.73%), building construction (up 0.66%) and insurance carriers (up 0.54%).

It was the second consecutive week that the depository financials were among the Top Five best-performing sectors, having also been there in the week ended July 6, with a 0.75% gain. On the other hand, automotive services - chiefly vehicle rental companies - had been among the weakest finishers the previous week, with a 0.32% return.

On the downside, food stores had the single worst showing of any significantly sized sector, sliding by 2.01%, mostly due to a plunge in SuperValu Inc.'s bonds after the No.-3 traditional U.S. supermarket operator reported considerably worse-than-expected quarterly numbers. It was the sector's fourth consecutive week among the Bottom Five worst performers, including the July 6 week, when it gained just 0.32%, well below most other sectors.

Also among the underachievers in the latest week were coal mining (down 1.60%) and electronics manufacturing (down 0.44%). Along with the food stores, they were the only large-sized sectors actually finishing in the red this past week. Metals mining and transportation equipment manufacturing were barely in the positive column, with anemic returns of 0.01% and 0.08%, respectively.

Coal remained the most volatile of the significantly sized sectors, falling deep in the red in the latest week after having actually been the top performer in the July 6 week, with a 1.47% gain. The week before that, ended June 29, it had been the worst-finishing major sector - and it had again been the best of them all in the week ended June 22. And the sector had been among the Bottom Five in each of the five weeks immediately before that, going back to mid-May, including two weeks during that stretch in which it had the worst showing of any key sector.

Transportation equipment makers were among the laggards for a third straight time - the group had weak returns of 0.31% in each of the previous two weeks - but metals mining had actually finished the July 9 week among the best performers, with a 1.16% gain.

Real estate in lead for year

Twenty-eight weeks into 2012, real estate remains the best-performing major sector on a year-to-date basis, with a 15.06% cumulative return, its sixth consecutive week in the top spot and on a longer-term basis, the 21st week there out of the past 24.

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 sixth straight week, with a 13.15% gain on the year.

Close behind was depository financial institutions (up 13.06%), with insurance carriers (up 11.12%) and automotive services (up 10.98%) not too far back.

On the downside, coal remained in negative territory with a 4.73% cumulative loss but was still the only major-sized sector there for the year so far.

Others posting just relatively modest gains on a cumulative basis included the week's biggest major-sector loser, food stores, (up 3.64%) and oil and gas exploration and production (up 4.74%).

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