Advantage Data: Refiners, utilities led high-yield key-sector surge last week, publishing weakest

By Paul Deckelman

New York, May 23 - The high-yield market posted its ninth consecutive gain in the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

Those gains represent a continuation of the pattern of strength seen in the sector breakdowns for most of this year; after advances were recorded in each of the first nine weeks of this year - part of a 14-week winning streak that dated all the way back to last Dec. 3 - that streak was snapped by negative results over two weeks in mid-March. However, the sectors rebounded later that month and have been on the rise ever since then.

Continuing the trend of solidly, and usually overwhelmingly positive results most weeks, a pattern interrupted only by that two-week sojourn, 59 of the 76 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 12 sectors ending in the red and another five showing not enough statistically meaningful activity to produce any kind of results.

In the week before, ended May 13, there were 60 sectors showing positive returns, with nine sectors posting negative numbers, two - coal mining and precision instrument manufacturing - showing no change at all and four showing no results.

Some 27 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. In the previous week, 25 sectors showed positive results against three sectors showing a loss, and two unchanged sectors.

Among specific sectors, bonds of petroleum refiners and providers of electric and gas services showed notable strength in the latest week. On the downside, publishing, automotive services and food stores all posted losses, while several others turned in particularly anemic positive returns.

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, rose on a Friday-to-Friday basis versus the previous week's cumulative return for a ninth straight week.

Petroleum refining pumped up

Among specific significantly sized sectors, the best-performing sector this past week was petroleum refining, whose bonds returned 0.71%. It was a sharp turnaround from the week before, when the group had been among the weaker finishers with a tiny gain of just 0.01%.

That was followed in the latest week by electric and gas services (up 0.69%), health care (up 0.58%), amusement (up 0.57%), financial brokers and exchanges (up 0.56%) and machinery and computer manufacturing (up 0.52%).

It was the second straight week among the big gainers for the brokerages and exchanges group, which in fact had been the best-performing of all major sectors the week before with a 0.68% gain. The utilities have now been among the top finishers in three weeks out of the last four, and the amusement companies in two weeks out of the last three.

On the downside, publishing was the worst-performing major sector with a 0.16% loss; it was the second straight week among the underachievers for the sector, which had a 0.14% loss the week before.

Other key sectors showing losses in the latest week were automotive services, consisting chiefly of vehicle-rental names (down 0.14%) and food stores (down 0.12%), breaking a four-week winning streak during which the grocers had been among the elite finishers. Sectors posting just small gains on the week included depository financial institutions (up 0.12%), chemical manufacturing (up 0.13%) and metals production (up 0.14%).

Food stores in lead for year

On a year-to-date basis 20 weeks into 2011, bonds of the major-sized sectors have been strong, with 28 out of 30 showing cumulative returns of at least three full percentage points, including three above 7% year to date, 10 more above 6%, nine others topping 5% and an additional four above 4%.

Bonds of food store operators had the best cumulative return at 7.79%, followed by the previous week's leader, insurance carriers (up 7.47%), miscellaneous retailers (up 7.05%) and petroleum refining (up 6.93%).

Bringing up the rear, publishing had a relatively subdued 2.22% year-to-date return, followed by real estate (up 2.99%), metals mining (up 3.26%) and building construction (up 3.86%).

Key indicator gains continue

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 return as of Friday of 0.13%, on top of the previous week's 0.147% gain. It was the ninth consecutive week-over-week gain and lifted the index to a total return of 6.071% as the week ended - a new 2011 peak level - up from 5.933% at the end of the previous week.

As of Friday, the index showed an average price of 104.460, a yield to worst of 6.66% and a spread to worst of 506 basis points over comparable Treasuries, versus a price of 104.481, a yield of 6.686% and a spread of 504 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.