Advantage Data: Insurance, amusement, utilities led gains among key high-yield sectors last week

By Paul Deckelman

New York, April 12 - The high-yield market continued to build upon its recent gains in the week ended Friday, according to statistics supplied to Prospect News by Advantage Data Inc., as junk industry sector returns made it eight consecutive weeks on the upside, following four weeks before that on the downside, and the market again continued to rebound convincingly from its mid-February lows for the year.

Those eight weeks of solid gains represent a continued return to the pattern of strength seen before the four-week losing streak, which lasted from the week ended Jan. 22 through the week ended Feb. 12. Prior to those four bad weeks, junk had put together 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 33 weeks and just eight in the last 39, 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 insurance carriers, other financials such as investment and holding offices and brokers and exchanges, and non-financials like amusements, electric and gas services and health care turned in the strongest showings.

On the downside, no major sectors finished in the red, but chemical manufacturing, food stores and building construction were particularly weak, as were coal mining and telecommunications.

Of the 73 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 67 had positive returns and just six had negative results on the week, improving slightly upon the results seen the previous week, ended April 2, when 63 sectors had finished in the black and 10 were in the red.

Among the significantly sized sectors, all 30 were in positive territory in the latest week, against no negatives, as noted, continuing and extending the trend seen the previous week, when 27 sectors showed gains against three losses.

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, continued to improve for an eighth straight week, pushing upward to establish another new peak level for 2010 so far.

Insurance still setting the pace

The best-performing major sector on the week was insurance carriers, which was up 1.57%. Insurance has now been among the top finishers for seven consecutive weeks, dating all the way back to the week ended Feb. 26 and including the previous April 2 week, when insurance was a co-leader along with depository financial institutions, both returning 1.16% that week.

Other financials doing especially well this past week were investment and holding offices, up 0.92% - a sharp turnaround from the previous week, when it was among the weaker groupings with just a 0.17% gain - and brokers and exchanges, up 0.88%.

Also strong this past week were amusements (up 1.12%), electric and gas services (up 1.08%), health care (up 0.96%) and lodging (up 0.85%). Health care and the utilities had each been among the worst performers the week before, when they lost 0.06% and 0.40% - the latter the worst among all major sectors - respectively.

On the downside, with all significant sectors ending in the black, as noted, chemical manufacturing was the worst laggard, returning just 0.04%. Food stores were up only 0.18%, telecommunications, coal mining and building construction were each ahead by a mere 0.19% and paper manufacturing was up a paltry 0.24%.

Financials top yearly results

On a year-to-date basis so far, financial sectors continue to show the strongest performance among the significantly sized sectors, led by depository institutions (up 13.68%), insurance carriers (up 13.13%), non-depository institutions (up 10.87%), investment and holding offices (up 9.56%) and brokers and exchanges (up 9.40%).

Other big cumulative gainers, with 14 weeks now in the books and 38 to go, include chemical makers (up 7.26%), transportation equipment manufacturing (up 6.61%), oil and gas drilling (up 6.48%), electronics manufacturing (up 6.11%), metals mining (up 5.85%), and lodging (up 5.70%).

No major sector was in the red on a year-to-date basis in the latest week. Food stores (up just 1.81%), electric and gas services (up 2.19%), precision instruments makers (up 2.49%), business services (up 2.62%), coal mining (up 2.82%) and health care (up 3.42%) lagged behind all of the other major sectors.

Key market indicator hits new high

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, continued to strengthen for yet another week, posting a 0.586% one-week gain as of the close on Friday to end the week with a year-to-date return of 5.435%, a new peak level for the year. That eclipsed the old 2010 week-ending peak of 4.821%, seen at the close of the previous 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 98.410 at Friday's close, with a yield to worst of 8.31% and a spread to worst of 583 basis points over comparable Treasuries - versus a price of 97.012, a yield of 8.42% and a spread of 594 bps at the end of the previous week.

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