Advantage Data: Manufacturers, banks lead junk sectors' slide; insurers, energy buck trend

By Paul Deckelman

New York, June 22 - Bonds of most high-yield industry sectors slid into the red in the week ended Friday, June 19, according to statistics supplied to Prospect News by Advantage Data Inc.

It was the second week in the last three in which more sectors were on the downside, although most of the sectors had been up in the previous week, ended June 12. The downturn was only the third in the last 14 weeks.

In the latest week, among the more significantly sized broad-industry sectors and subsectors - as measured in terms of the number of issuers, the collective number of issues and the total face amount of bonds tracked - manufacturing sectors such as electronics, publishing, chemicals and transportation equipment were the major losers, although some financials - notably those for depositary institutions like commercials banks and non-depositary institutions like non-bank credit providers -- were also in that category.

Only a few significant sectors were on the upside, including insurance carriers, petroleum refiners and coal miners.

Of the 69 broad-industry sectors into which Boston-based Advantage Data currently divides its high-yield universe, 43 showed negative returns in the week ended Friday, while 26 had positive returns - a reversal of the pattern seen in the June 12 week, when 59 sectors finished in the black, against 10 in the red.

Meanwhile, the overall junk market, as measured by the widely followed Merrill Lynch High Yield II Master Index, posted its first decline in many weeks, breaching the psychologically potent 30% support level.

Manufacturers move lower

Manufacturing sectors led the way downward, with makers of electronic components and items other than computers sliding 4.86%.

Other losers included publishing, down 3.28%, chemical makers, off 2.36%, and transportation equipment makers - pulled down by their all-important motor vehicles segment - down 1.58%.

Faltering financials included depositary institutions like banks, down 1.85%, and non-depositary institutions like commercial lenders, off 3.75%. Business services declined 1.93%, electric and gas utilities lost 1.24%, telecommunications was off 1.10% and lodging eased 1.02%.

Insurers inspire gainers' group

Only four of the significantly sized sectors were on the upside this past week, with insurance carriers the best at 0.93%. Among energy producers, the sector that includes petroleum refining was up 0.39%, while coal mining gained 0.26%. Metals producers like steel mill operators rose 0.18%.

Real estate, brokers lead on year

Advantage Data reported that the real estate sector had a 70.19% year-to-date return, tops among all of the significantly sized broad-industry groupings.

Also among the financials, the brokerages and exchanges sector showed a 59.24% return for 2009 so far. Automotive services, dominated by vehicle-rental companies, had a 46.29% cumulative return.

Other notable gainers among the largest sectors on a year-to-date basis included telecommunications (up 34.22%), miscellaneous retailing (up 32.86%), business services (up 32.25%), metals producers (up 31.88%), metals mining (up 30.90%) and oil and gas mining (up 30.29%).

On the downside, no significantly sized sectors were in the red year to date. Only one - depositary financial institutions (up 8.18%) - was in the single-digits on a percentage basis.

Market gains continue

Looking at the overall domestic high-yield market, as measured by the widely followed Merrill Lynch High Yield Master II Index, junk showed a 1.31% one-week decline, cutting its year-to-date return to 28.72% from 30.43%% seen the previous Friday.

The average price of a high-yield issue covered by the Master II stood at 77.43 as of the close on Friday, with a spread to worst of 1,055 basis points over comparable Treasuries and a yield to worst of 13.39% - versus a price of 78.63, a spread of 1,024 bps and a yield of 13.09% the week before.

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