Advantage Data: Insurers, brokers, business services led major sector slide last week; coal gains

By Paul Deckelman

New York, June14 - The high-yield market slid badly in the week ended Friday, according to industrial sector statistics supplied to Prospect News by Advantage Data Inc., reversing the gains which had been seen in the previous two weeks ended June 4 and May 28.

The latest week's retreat was only the second since mid-February.

The vast majority of the overall broad-industry sectors finished in the red, against a relative handful ending in the black. Among the more significantly sized sectors - as measured by the number of issuers, the collective number of issues and the total face amount of securities tracked - all of the sectors but coal mining, finished on the downside.

The biggest losers were insurance carriers, financial brokers and exchanges, business services and electronics manufacturers, all plunging by more than a full percentage point on the week.

Of the 71 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 61 had negative returns on the week and 10 had positive results. That was a sharp reversal versus the previous week, when 43 sectors had finished in the black, 27 were in the red and one - real estate - finished at a flat 0.00% reading.

Of the 30 significantly sized sectors, 29 finished in negative territory this past week versus the previous week, when 15 sectors showed gains, 14 showed losses and real estate, as noted, showed neither. As stated, coal mining was the sole sector in positive territory.

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, moved down from the previous week's reading for a second consecutive week.

Insurers worst on the week

While virtually all of the major sectors ended in the red, the single worst finisher was the insurance carriers, which fell by 1.85%. The insurers were also among the big losers the week before, when the group lost 0.52%. In fact, they had also been the single worst performer the week before that with an even 1% decline.

Other notable downsiders this past week included financial brokers and exchanges, down 1.32%; business services, down 1.24%; electronics manufacturing, down 1.17%; paper manufacturing, down 0.93%; and depository financial institutions, down 0.89%.

It was a big comedown for the depository institutions and the financial brokers, which had both been among the previous week's leaders, with gains of 0.43% and 0.35%, respectively. But the financial brokers and exchanges group has still now been among the worst laggards in two weeks out of the last three.

Coal mining came in with a 0.15% gain - a solid turnaround, considering the overall market weakness, from the prior week, when its 0.30% loss was among the worst.

With just that one sector in the black, the relative best performers' group was filled out by major sectors having considerably smaller losses than their peers, including food stores (down 0.02%), wholesale durables goods distributors (down 0.03%), health care (down 0.07%), metals mining (down 0.15%) and food manufacturing (down 0.20%).

Metals mining and food manufacturing had also been among the previous week's leaders, when they were up 0.41% and 0.32%, respectively. It was the third straight week among the leaders for metals mining, also there two weeks ago with a 0.63% gain.

Financials still top yearly results

On a year-to-date basis, financial sectors, for the most part, continue to show the strongest performance among the significantly sized sectors. They have, however, steadily weakened from higher levels in the recent past.

Financial sectors were led by depository financial institutions (up 9.68%), insurance carriers (up 8.57%), non-depository institutions (up 7.75%), investment and holding offices (up 7.10%), brokers and exchanges (up 4.68%) and real estate (up 4.47%).

Other notable cumulative gainers, with 23 weeks now in the books and 29 to go, include amusements (up 6.35%), chemical makers (up 5.11%), transportation equipment manufacturing (up 4.63%), metals mining (up 4.32%) and wholesale durable goods distributors (up 3.99%).

For the first time since late February, major sectors tumbled into the red on a year-to-date basis. Business services, which was one of the bigger losers on the week, ended down 0.90% on the year so far, while miscellaneous retailing has lost 0.82%. Meanwhile, the cumulative returns for electric and gas services (up just 0.36%), precision instruments makers (up 1.33%), health care (up 1.98%) and food stores (up 2.25%) lagged behind all of the other major sectors.

Key market indicator eases off

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, retreated from the previous week's levels for a second straight week.

The index was off by 0.5% on a one-week basis as of the close Friday to end the week with a year-to-date return of 2.777%, down from 3.294% at the close on June 4.

The index remains well below 7.167%, the week-ending high for the year seen on April 30, and below the absolute 2010 peak level of 7.18%, seen earlier that same week. The index's low for the year was 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 94.552 at Friday's close, with a yield to worst of 9.38% and a spread to worst of 726 bps over comparable Treasuries. This compares to a price of 95.198, a yield of 9.24% and a spread of 714 bps at the end of the previous week.

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