Advantage Data: Amusement, auto services led major-sector gain last week; utilities lose power

By Paul Deckelman

New York, Feb. 7 - The high-yield market continued to improve in the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc. It rose for a 10th consecutive week, a winning streak dating back to Dec. 3.

Gaining sectors have now outpolled losing sectors in 22 weeks out of the last 26, dating back to the week ended Aug. 13.

Some 58 of the 73 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 nine ending in the red, one sector unchanged, showing neither a gain nor a loss, and five sectors showing not enough statistically meaningful activity to produce any kind of results.

The results represented a slight pullback from the previous week, ended Jan. 28, when there were 64 sectors recording positive returns, with just three ending in negative territory and six sectors with no results.

Some 26 out of the 30 most significantly sized sectors, as measured by the number of bond issuers, the collective number of issues tracked and their total face amount, ended in the black this week, with three finishing in the red and one - chemical manufacturing - showing neither a gain nor a loss. That continued, at a slightly less intense pace, the bullish trend seen the week before, when all 30 of those sectors had positive returns, against no negatives.

Amusement led all of the major sectors this past week, with automotive services and the lately improved food stores group also turning in notable gains. On the downside, electric and gas services and insurance carriers showed the biggest losses.

On a statistical basis, the junk market's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, continued to show solid gains five weeks into 2011, with advances seen each day of the week. It was the 10th straight week of continued advances for the index.

Amusement on top

Among specific significantly sized sectors, the single best finisher this past week was the amusement sector, whose bonds showed a 0.68% return. That was followed by automotive services (up 0.64%), food stores (up 0.60%), lodging (up 0.57%), machinery and computer manufacturing (up 0.55%) and business services (up 0.48%).

It was the second straight week among the elite finishers for food stores, which had actually been the best performer among the major sectors in the previous week with a 1.07% gain, the only major sector improving that week by more than a full percentage point. The food stores have also been among the big gainers now in three weeks out of the last four - although before the most recent two-week splurge, the volatile sector had also been among the worst performers in six out of the previous seven weeks.

The business services sector has now been among the big gainers for three straight weeks, though the machinery and computer manufacturing group had been among the worst performers in the Jan. 28 week.

On the downside, bonds of electric and gas service providers had the worst showing of any major sector, down 0.39%, followed by insurance carriers (down 0.30%), precision instrument manufacturing (down 0.23%) and chemical manufacturing - unchanged, as noted, its 0.00% reading showing neither a gain nor a loss. Rounding out the week's weakest finishers, paper manufacturing was up just 0.06% and coal mining by only 0.07%.

It was the second straight week among the underachievers for the insurers and the chemical makers - but marked a comedown for the papermakers, which had been among the best finishers in each of the previous two weeks.

Amusement takes lead on year

On a year-to-date basis five weeks into 2011, bonds of most of the major-sized sectors have been strong, with 27 out of the 30 showing cumulative returns of at least one full percentage point or more, up from 26 the previous week, with 14 of those above 2%, versus eight the week before - and one sector now above 3% on a year-to-date basis.

Outperforming all others so far is the amusement sector, on the strength of its posting the best showing among the majors on the week, boosting its overall return to 3.18% and returning it to the top spot for the year so far, which it had temporarily relinquished the week before.

Petroleum refining held onto second place with a 2.88% gain, while automotive services and business services, each among the strong finishers on the week, as noted, moved into a third-place tie at 2.65%. That vaulted them ahead of the previous week's cumulative leader, paper manufacturing, whose year-to-date return was little changed at 2.51% while the other sectors sprinted ahead, dropping the papermakers into a tie with investment and holding offices.

On the downside, real estate remained the worst year-to-date performer among the majors, although the group edged its way into positive territory (up 0.04%), after having previously been the sole key sector in the red for the year so far. The only other sectors failing to break the 1% return mark were metals mining (up 0.69%) and the week's single worst performer, as noted, electric and gas services, whose loss on the week dropped its year-to-date return to 0.99%.

Key indicator adds to gains

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, continued to rise for a 10th consecutive week, gaining 0.464% in the week ended Friday, on top of the 0.564% advance seen the previous week. Gains were seen in all five sessions of the most recent week.

That left the index with a robust total return of 2.567% as of Friday - yet another new peak level for the year so far - up from 2.093% the week before.

The average price of a high-yield issue covered by the Master II finished at 103.627 at Friday's close, with a yield to worst of 6.974% and a spread to worst of 496 basis points over comparable Treasuries - the first time this year the latter two figures edged below 7% and 500 bps, respectively. That compares with a price of 103.385, a yield of 7.005% and a spread of 529 bps at the end of the previous week.

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