Advantage Data: Food stores, amusement led major-sector gain last week; metals mining only loser

By Paul Deckelman

New York, Feb. 14 - The high-yield market showed another gain in the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

The market rose for an 11th consecutive week, a winning streak dating back to Dec. 3. Gaining sectors have now outpolled losing sectors in 23 weeks out of the last 27, dating back to the week ended Aug. 13.

Some 64 of the 74 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 six ending in the red, and four sectors showing not enough statistically meaningful activity to produce any kind of results.

The results represented a modest improvement from the previous week, ended Feb. 4, when there were 58 sectors recording positive returns, with nine ending in negative territory, one sector unchanged, showing neither a gain nor a loss, and five sectors with no results.

Some 29 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 just one - metals mining - finishing slightly in the red. That extended and reinforced the bullish trend seen the week before, when 26 of those sectors had positive returns, with three having negative returns and one - chemical manufacturing - showing neither a gain nor a loss.

Food stores led all of the major sectors this past week, amusement and lodging also turning in notable gains. On the downside, metals mining, as noted, was the sole sector in the red, while electronics manufacturers and food producers had particularly anemic gains.

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, was up on a Friday-to-Friday basis for an 11th straight week, with advances seen in all but one day of the week.

Food stores top sector

Among specific significantly sized sectors, the single best finisher this past week was the food stores sector, whose bonds had a 1.03% gain - the sole key sector to return above 1% on the week.

It was the third consecutive week among the top gainers for the sector, and the fourth week out of the last five. It was also the second time in three weeks the food stores group had led all of them - a sharp turnaround for the volatile and streaky sector, which before the past three weeks had also been among the worst performers in six out of the previous seven weeks.

Food stores was followed by amusement (up 0.84%), lodging (up 0.82%), petroleum refining (up 0.52%), wholesale durable goods distributors (up 0.46%) and oil and gas exploration and drilling (up 0.44%).

Amusement and lodging have now been among the top finishers for two straight weeks; in fact, amusement was the best-performing major sector the week before with a 0.68% gain.

On the downside, as noted, metals mining was the only major sector actually in the red on the week, its bonds easing by 0.07%. Groups finishing on the positive side, but just barely so, included electronics manufacturing and food processing companies, each up only 0.04% on the week, financial brokers and exchanges (up 0.09%), building construction (up 0.10%) and coal mining (up 0.11%). The latter sector was also among the most feeble finishers in the previous week, when it was up just 0.07%.

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 28 out of the 30 showing cumulative returns of at least one full percentage point or more, up from 27 the previous week, with 22 of those above 2%, versus 15 the week before; the 22 included four sectors above 3% on a year-to-date basis, versus just one a week earlier, and one sector now above 4% on a year-to-date basis.

That would be amusement, on the strength of its posting one of the better showings for a second straight week, boosting its cumulative return to 4.14%.

Petroleum refining continued to hold onto second place with a 3.32% year-to-date gain, followed by wholesale durable goods distributors (up 3.15%) business services (up 3.10%) and investment and holding offices (up 3.07%).

On the downside, real estate remained the worst year-to-date performer among the majors, up just 0.18%. The only other sector failing to break the 1% return mark was metals mining - the week's single worst performer among the key sectors and the only actual loser, as noted - up 0.61% on the year. Electric and gas services edged barely above the 1% cumulative return mark, at up 1.08%.

Key indicator up again

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 an 11th consecutive week going back to early December. It gained 0.303% in the week ended Friday, on top of the 0.464% advance seen the previous week. Gains were seen in four sessions out of five this week, with a small setback recorded on Thursday.

With six weeks in the books so far this year, that left the index with a total return of 2.878% as of Friday, up from 2.567% the week before, although the index ended the week slightly below its 2011 peak level of 2.909%, set this past Wednesday.

The average price of a high-yield issue covered by the Master II finished at 103.786 at Friday's close, with a yield to worst of 6.914% and a spread to worst of 487 basis points over comparable Treasuries. That compares with a price of 103.627, a yield of 6.974% and a spread of 496 bps at the end of the previous week - the first time this year the latter two figures had edged below 7% and 500 bps, respectively.

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