Advantage Data: Printing, construction best, coal worst as junk major-sector rally continues

By Paul Deckelman

New York, Dec. 2 - The high-yield market posted its third consecutive weekly gain during the holiday-shortened week ended Friday, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Junk thus continues to come back from the relatively rare loss the market had posted in the week ended Nov. 8, which had snapped a winning streak of five consecutive weeks on the upside before that and nine weeks out of the previous 10.

The latest weekly advance now runs that positive trend to eight weeks out of the last nine and 12 weeks out of the last 14.

It was the 33rd weekly improvement that the junk market has seen so far this year, versus 15 weekly setbacks.

In the latest week, 61 out of the 63 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black, with only two sectors ending in the red.

That represented a strengthening from the week before, ended Nov. 22, when 57 of those sectors had recorded gains and three had suffered losses. In the interim, Advantage Data recalculated and expanded its sector roster.

That robust trend was also seen in the behavior 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 outstanding. In the week ended Friday, 29 out of the 30 were finishing in positive territory, with only one showing negative results, for a second consecutive week.

Among specific major sectors in the latest week, bonds of printing and publishing companies and building construction concerns turned in the best showings, while coal mining companies had the sole loss on the week.

Index improvement continues

Statistical indicators of general market performance were meanwhile higher versus the previous week for a second straight week after having been mixed for the previous four straight weeks.

The total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, posted its third consecutive weekly gain. Those advances had followed a loss in the week ended Nov. 8, which, in turn, had come after the index had racked up five straight weeks of gains before that.

At the close on Friday, the index showed junk bonds having risen by 0.35% on the week, on top of the previous week's improvement of 0.271%.

The index has now seen 29 weekly gains so far in 2013 against 19 losses. It had finished 2012 with 40 weekly gains versus 12 losses.

As of Friday, the index's year-to-date return had firmed to 6.805%, up from 6.433% the prior Friday. It was also a sixth consecutive new peak level for 2013, surpassing the 6.78% reading recorded on Thursday (Merrill Lynch published the index on Thursday, even though junk and other fixed-income markets in the United States were technically closed that day in observance of Thanksgiving).

Those levels all remained well above the index's 2013 low point of 0.384%, recorded on June 25, but well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 103.5196 on Friday, up from 103.2926 a week earlier. Those levels meanwhile remain well under the highest average price for the year of 107.222488, set on May 9.

The index's yield to worst stood at 5.572%, down from 5.67% a week earlier. While having come in markedly from its high point for the year of 6.853%, set on June 25, it still remained well above its low yield for the year of 4.986% on May 9 - which was also the lowest all-time yield as well.

Its spread to worst over comparable Treasury issues stood at 433 basis points, in from 441 bps the week before. While recently trending lower, the spread continued to steer a course in between its 2013 wide point of the year of 536 bps, set June 25, and its tightest level for the year so far of 427 bps over Treasuries, set on May 9.

Printing shows some pop

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of printing and publishing providers as the best performer among the significantly sized groupings, with a 0.65% gain on the week.

Also showing strength in the latest week were building construction (up 0.49%), followed closely by telecommunications (up 0.48%), precision instrument manufacturers (up 0.47%) and transportation equipment manufacturers (up 0.46%).

It was the second consecutive week that the builders were among the Top Five best-performing key sectors, having also been there the week before with a 0.34% gain.

On the downside, only coal mining actually ended with a loss among the most significantly sized sectors, easing by 0.13%. It was the miners' third consecutive week among the worst finishers, as they had also been there the week before with a puny 0.10% advance. Coal - weak for most of the year - has now been the worst-performing major sector in two weeks out of the last three.

The latest week's Bottom Five list of the worst large-sector performers was rounded out this week by relatively anemic results from paper manufacturing (up 0.09%), the oil and natural gas exploration and production sector and the food stores sector (both up 0.14%) and lodging (up 0.17%). It was a sharp reversal for lodging, which had led all of the significantly sized sectors the week before, with a 0.51% gain that week.

Grocers improve for year

Forty-eight weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 46th straight week, posting a cumulative return of 19.25%. It remained the first, and so far the only, major sector to hit double digits on a percentage basis this year, although several other sectors have come close to also breaking through that barrier.

The latest of those is depository financial institutions, whose year-to-date return stood at a tantalizing 9.99% as of Friday, assuming the runner-up spot despite having not been among the year-to-date leaders the week before.

Among the other year-to-date leaders were non-computer electronics manufacturing and petroleum refining, which tied for third-best with a 9.06% return, followed by health care services (up 8.14% on the year). Like the depository financials, none of those three sectors had been among the previous week's year-to-date leaders.

On the downside, coal mining (up 1.31% on the year) maintained its familiar status as weakest-performing major sector for the year to date for a second straight week, after having been just third-worst the week before and fourth-worst the week before that. Before briefly improving for those two weeks, relatively speaking, coal had spent 21 straight weeks before that as the absolute worst-performing significantly sized sector, including a six-week stretch in that time during which it had actually been showing red ink for the year rather than just relatively small cumulative gains.

Electric and gas utilities (up 4.76%) meanwhile stayed right down near the bottom as second-worst on the year for an 18th consecutive week.

Insurance carriers fell to third-worst on the year with a 4.96% return and oil and gas E&P companies were fourth-worst (up 5.18%), even though neither had been among the worst year-to-date underachievers the week before.

Food manufacturing was fifth-worst for a second straight week, with a 5.34% return.

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