Advantage Data: Lodging, business services led major-sector surge last week; food stores feeble

By Paul Deckelman

New York, Nov. 8 - The high-yield market showed gains for a 12th consecutive week during the period ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

The week's performance continued the strong pattern seen in the previous week, ended Oct. 29. Gaining sectors have now outpolled losing sectors in 13 weeks out of the last 14 and in 19 weeks out of the last 21.

All 74 of the broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black in the latest week, with none ending in the red. That extended and strengthened the trend seen the previous week, during which 70 sectors had positive results, against just four having negative results.

Such lopsided positive-sector breakdowns have been seen over almost all of the weeks since around the middle of July, including the stretch seen over the last 10 straight weeks, in which more than 60 sectors have finished on the plus side each time.

For a second consecutive week, all 30 of the most significantly sized sectors, as measured by the number of issuers, the collective number of issues and the total face amount of securities tracked, showed gains in the most recent week, against none showing losses.

The biggest gainers in the latest week among those major sectors were the bonds of lodging providers, business services companies, electronics manufacturers and papermakers, all of which gained at least a full percentage point on the week. There were no sectors actually in the red, as noted, but food stores showed only a weak gain.

On a statistical basis, the junk market's year-to-date performance, as measured by the widely followed Merrill Lynch High Yield Master II index, ended the week at a new 2010 peak level, having risen from the previous Friday for a 10th consecutive week.

Lodging leads the way

Among the specific significantly sized sectors, the single best finisher this past week was lodging, checking in with a 2.15% return on the week. It has now been among the top-performing key sectors for six straight weeks, including the previous week, when it recorded a 1.04% gain.

Also showing strength were business services (up 1.25%), electronics manufacturing (up 1.15%), paper manufacturing (up 1.05%) and the chemical manufacturing and real estate sectors (each up 0.95%). It was the second straight week among the elite finishers for the papermakers and the real estate companies, which had gains of 1.05% - identical to its latest advance - and 1.16%, respectively, in the week ended Oct. 29.

On the downside, for a second straight week, as noted, no major sector actually finished in the red.

Food stores had a feeble 0.18% gain, followed by metals processing (up 0.29%), health care (up 0.41%), oil and gas exploration and production (up 0.45%) and the automotive services and coal mining sectors (each up 0.52%). Both of the latter sectors had also been among the underachievers in the Oct. 29 week with meager returns of 0.31% and 0.25%, respectively. The metals processing sector, meanwhile, had been the weakest of any major grouping that week, when it had returned just 0.05%.

Financials top yearly results

As has been the case for most of the year, financial sectors generally continue to show the strongest performance among the significantly sized sectors on a year-to-date basis, led by the bonds of insurance carriers (up 33.41%), depository financial institutions (up 21.88%), non-depository institutions (up 19.71%), brokers and exchanges (up 16.33%), real estate (up 14.95%) and investment and holding offices (up 14.21%).

Other notable cumulative gainers among the majors with 44 weeks now in the books and eight to go on the year include the bonds of electronics manufacturers (up 17.26%), transportation equipment makers (up 17.02%), metals miners (up 15.47%), amusement (up 14.38%), chemical makers (up 13.31%), oil and gas exploration and production (up 13.17%) and lodging (12.53%).

As has been the case since mid-June, no significantly sized sectors were in the red on a cumulative basis this past week. Bonds of food stores (up 4.40%), miscellaneous retailing (up 8.43%) and coal mining (up 9.91%) have had only relatively modest year-to-date net advances.

Key market indicator gains

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, continued to push upward this past week, rising by 0.844% for the period. Its year-to-date return as of Friday stood at 15.405% - up from 14.438% at the end of the previous week. The index thus ended above the previous Friday's reading for a 10th consecutive time and established another new 2010 peak level, surpassing the old mark of 15.175%, which had been set just the previous day, Thursday. The index's low for the year was a 0.357% loss recorded in the week ended Feb. 12.

The average price of a high-yield issue covered by the Master II stood at 103.296 at Friday's close, with a yield to worst of 7.08% and a spread to worst of 590 basis points over comparable Treasuries, versus a price of 102.666, a yield of 7.16% and a spread of 595 bps at the end of the previous week.

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