Advantage Data: Real estate, retail, refining plunged in past week

By Paul Deckelman

New York, Aug. 9 - The high-yield market stumbled badly last week, with the vast majority of industry groupings showing losses, breaking a five-week winning streak, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

It was the seventh weekly downturn so far this year, against 24 weeks when high yield has ended on the upside. The now-ended five weeks of upturn had followed three straight weeks before that on the downside.

Some 57 of the 69 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the red in the latest week, with just eight closing in the black and another four sectors showing not enough statistically meaningful activity to produce any kind of results.

That represented a sharp reversal of the bullish pattern seen the week before, ended July 29, when 47 sectors posted positive returns, 16 ended with negative results, one was unchanged, showing neither a gain nor a loss on the week, and five others showed no results.

Looking at 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 - 28 ended in the red this week, with only two finishing in the black - a complete turnaround from the trend seen the previous week, when 20 of the sectors showed positive returns, nine had negative results and another ended the week unchanged.

Among specific major sectors in the latest week, bonds of real estate operators, miscellaneous retailers and petroleum refiners were the worst finishers, with only non-depository financial institutions and food stores showing gains, the latter sector just barely.

Among statistical indicators, the junk market's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, fell considerably on a Friday-to-Friday basis, versus the slight easing seen the week before, and has now been on the downside in three weeks out of the last four.

Real estate leads the rout

Among specific significantly sized sectors, bonds of real estate companies showed the biggest loss, at 2.08%, followed by miscellaneous retailing (down 2.04%), and petroleum refiners (down 1.81%). It was the second straight week among the underachievers for the latter sector, which has now been among the worst performers in four weeks out of the last five.

Other significant losers in the latest week were the healthcare and coal mining sectors (both down 1.80%) and publishing (down 1.79%). It was the second straight week among the poorest performers for each, while the publishers have now been among the worst laggards in four weeks out of the last five and five weeks out of the last eight.

On the upside, bonds of non-depository financial institutions showed the strongest gain (up 0.28%), while foodstores edged up 0.01% - the only two among the major sectors to actually post gains. The rest of the best performers, relatively speaking, merely showed smaller losses than all of the other groupings - electric and gas services (down 0.04%), insurance carriers (down 0.39%), metals miners (down 0.44%) and depository financial institutions (down 0.48%).

The utilities have now been among the best performing sectors for four straight weeks, and in nine weeks out of the last 12, while it was the second straight week among the elite finishers for the depository financials. The metals miners have now been there in two weeks out of the last three and in three weeks out of the last five.

Food stores hold first

On a year-to-date basis 31 weeks into 2011, bonds of the major-sized sectors have been strong, with 29 out of 30 showing cumulative returns of at least three full percentage points, with three surpassing 8% year-to-date, two above 7%, five above 6% and 10 more above 5%.

Bonds of food stores continued to hold the top spot with a year-to-date gain of 8.26%, followed by the week's big gainer, non-depository financial institutions (up 8.09%) and then electric and gas services (up 8.08%), precision instrument manufacturers (up 7.72%) and insurance carriers (up 7.29%).

Bringing up the rear, building construction had a relatively modest 2.95% year-to-date return, followed by publishing (up 3.14%) and real estate (up 3.75%).

Key indicator gets clobbered

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, had a one-week loss as of Friday of 1.814% - the largest downturn of the year so far - versus a mild 0.003% easing in the week ended July 29. The big weekly loss left the index's year-to-date return at 4.279% - well down from the previous Friday's 6.206%, and down still further from the new 2011 peak level of 6.362%, set on July 26. It was the lowest level at which the index ended a trading week since the 4.067% reading seen on Friday, April 1.

As of this past Friday, the index showed an average price of 100.738, a yield to worst of 7.687% and a spread to worst of 632 basis points over comparable Treasuries, versus a price of 102.761, a yield of 7.06% and a spread of 571 bps at the end of the previous week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.