Advantage Data: Health care, instruments, transportation gear led gains among key sectors last week

By Paul Deckelman

New York, May 10 -The high-yield market continued to show some strength in the week ended Friday, according to statistics supplied to Prospect News by Advantage Data Inc., as junk industry sector returns made it 12 weeks in a row on the upside, although by a less overwhelming margin than the one seen in the previous week, ended April 30.

Those 12 weeks of solid gains, dating back to the week ended Feb. 19, represent a continued return to the pattern of strength seen before an uncharacteristic four-week losing streak which lasted from the week ended Jan. 22 through the week ended Feb. 12, when the junk market touched its lows for the year. Before those four bad weeks, junk had started 2010 on a solidly positive note, part of a 10-week winning streak between mid-November and mid-January.

Looking at a longer timeframe, there have now been only seven downturns in the last 37 weeks and just eight in the last 43, as upside momentum accelerates.

In the latest week, among the more significantly sized broad-industry sectors - as measured by the number of issuers, the collective number of issues and the total face amount of securities tracked - bonds of health care, precision instrument manufacturing and transportation equipment manufacturing companies had the best returns, while metals producers and financial brokerages and exchanges remained among the sectors showing losses on the week, along with metals mining.

Of the 73 broad-industry sectors into which Advantage Data currently divides its entire high-yield universe, 56 had positive returns on the week and 17 had negative results. In the previous week, 63 sectors finished in the black, eight were in the red and two sectors turned in completely flat 0.00% readings, showing neither a gain nor a loss.

Among the 30 significantly sized sectors, 20 were in positive territory in the latest week, against 10 negatives. In the previous week, 25 sectors had finished in the black, with four in the red and the one flat sector, building construction.

But while a majority of sectors continued to show gains, both overall and among the significantly sized groupings, the junk market's year-to-date performance, as measured on a statistical basis by the widely followed Merrill Lynch High Yield Master II index, sharply declined in the most recent week, breaking a string of 11 straight weeks in which the market measure had pushed upward to establish new peak levels for 2010 so far.

Health care has robust gain

The best-performing major sector on the week was health care, which was up by 1.17%.

Other gaining sectors included precision instrument manufacturing - chiefly medical devices - (up 1.14%), transportation equipment manufacturing (up 0.96%), electronics manufacturing (up 0.83%), automotive services (chiefly vehicle leasing and rentals) and electric and gas utilities, which were both up by 0.73% on the week.

Metals mining was the worst-performing sector this past week, down 1.33%.

Several financial sectors were also among the major losers this past week, including financial brokers and exchanges (down 0.75%), investment and holding offices (down 0.62%) and non-depository institutions (down 0.26%). Other non-financials among the big losers were metals production (down 0.68%) and coal mining (down 0.27%).

Metals production had been the single worst-performing major sector the week before, when it lost 0.49%, while brokers and exchanges were also among the underachievers that week, losing 0.75%.

Key market indicator sags badly

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, weakened notably, posting a 2.492% one-week loss as of the close on Friday to end the week with a year-to-date return of 4.497%.

The year-to-date return was well down from 7.167% at the close the previous Friday, the week-ending high for the year, although it was off slightly from the absolute 2010 peak level of 7.18%, seen earlier that week. The index's low for the year had been a 0.357% loss recorded the week ended Feb. 12.

The average price of a high-yield issue covered by the Master II stood at 96.979 at Friday's close, with a yield to worst of 8.74% and a spread to worst of 655 basis points over comparable Treasuries - versus a price of 99.671, a yield of 8.04% and a spread of 576 bps at the end of the previous week.

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