Advantage Data: Auto services, financial brokers lead as major junk sectors continue rebound

By Paul Deckelman

New York, March 4 - The high-yield market made it three straight weekly gains in the period ended Friday, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That advance built on the gains seen in the previous week, ended Friday, Feb. 22, and the week before that, ended Feb. 15, when junk had broken out of a two-week slump.

The latest results marked junk's seventh weekly gain so far in 2013, against two weekly losses, which occurred back-to-back in the weeks ended Feb. 1 and Feb. 8. On a longer-term basis, last week marked the 14th gain in the last 19 weeks, against five losses during that timeframe. Most of the upside during that time was provided by a dazzling streak of 10 consecutive weekly gains between last November and the week ended Jan. 25.

Out of the 67 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 64 finished in the black last week, with only three sectors ending in the red.

That represented a general continuation of the pattern seen the previous week and in fact was a modest improvement. In that prior week, 58 sectors showed gains, nine showed losses and one other sector finished with a flat 0.00% reading, showing neither a gain nor a loss on the week. (In the interim, Advantage Data recalculated and slightly contracted its roster of sectors, bringing the overall number down to 67 from 68 the week before).

The continuing rebound from last month's two-week plunge into the red in the overall market was reflected 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 latest week, all 30 of those bigger sectors showed gains on the week, versus no losses. It was the second time in three weeks for such a pronounced clean sweep; the week before, 26 sectors had finished in positive territory, against just three showing losses and the one unchanged sector.

Among specific major sectors in the latest week, bonds of automotive services providers and financial brokerage firms and exchanges had the best showings. Bonds of petroleum refiners and insurance carriers had the smallest gains.

Statistical indicators of general market performance posted their third consecutive week of gains, including the total year-to-date return as measured by the widely followed Merrill Lynch High Yield Master II index, as they continued to rebound after two consecutive weeks of losses before that. Those losses, in turn, had followed 10 straight weeks of gains.

Index extends gains

The Merrill index showed junk bonds with a one-week gain of 0.355% as of the close Friday, extending the previous week's 0.129% advance. The index, which has now seen seven gains so far in 2013 against the two losses, finished 2012 with 40 weekly gains versus 12 weekly losses.

The index's year-to-date return stood at 1.859%, up from 1.499% the week before, and not too far from its 2013 peak level of 1.991%, recorded on Jan. 28. The index had finished 2012 with a cumulative return of 15.583%, just a little below the peak for the year of 15.589%, set on Dec. 20.

Among its other components, the index showed an average price of 104.854 on Friday, up from 104.746 the previous Friday and up as well from 104.352 on the final day of 2012. Its yield to worst stood at 5.841%, having come in from the week-earlier yield of 5.855%. It was also well in from its year-end yield of 6.083%. Its spread to worst over comparable Treasury issues widened slightly to 504 basis points from 499 bps the week before but had tightened from 523 bps at year-end.

Autos, brokers drive rally

Back on a sector basis, Advantage Data meanwhile showed the bonds of automotive services companies - chiefly those in the vehicle rental business - and financial brokers and exchanges having the best showing on the week among the significantly sized sectors, with each up by 0.58%.

Also showing strength in the latest week were food store operators (up 0.57%), coal mining companies (up 0.45%) and precision instrument manufacturers (up 0.43%). The week before, the coal miners had lost 0.09%, giving them the worst single-showing of any significantly sized sector for the third time in four weeks. The precision instrument makers had also been among the Bottom Five worst finishers in that previous week, with a flat 0.00% reading.

There was no downside as such this past week, with all 30 sectors finishing in the black. The weakest finisher among those was petroleum refining, which was up just 0.04%.

Other underachievers on the week included insurance carriers (up 0.14%), building construction (up 0.22%) and the telecommunications and non-depository credit institutions sectors (each up 0.23%).

Food stores in lead for year

Nine weeks into 2013, the food stores sector remained the leader among the key sectors on a year-to-date basis for a seventh straight week, posting a cumulative return of 8.62%. Metals mining was second-best, also for a seventh straight week, with a 3.47% year-to-date return. Rounding out the top year-to-date performers so far were metals processing (up 2.66%), followed by lodging (up 2.64%), the same as the week before. Financial brokers and exchanges were returning 2.60% for the year so far.

Among the year-to-date laggards were telecommunications (up 1.02%), electric & gas utilities (up 1.08%), coal mining (up 1.26%), transportation equipment manufacturers (up 1.31%) and despite its strong showing on the week, automotive services (up 1.70%). All had also been among the 2013 underachievers the week before.

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