Advantage Data: Refiners, publishers lead as major junk bond sectors keep strengthening

By Paul Deckelman

New York, April 15 - The high-yield market posted its ninth successive week of gains in the period ended Friday, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Those gains have been seen since the week ended Feb. 15, when junk had broken out of a two-week slump.

The latest results marked junk's 13th weekly gain so far in 2013, against just those 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 20th gain in the last 25 weeks, against five losses during that timeframe. Besides the current streak, a dazzling stretch of 10 consecutive weekly gains between last November and the week ended Jan. 25 also accounted for much of those gains.

All 66 of the broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black last week, with none ending in the red.

That represented a continuation and even a strengthening of the already-robust pattern seen the previous week, ended April 5; in that prior week, 60 sectors showed gains and five posted losses. In the interim, Advantage Data recalculated and slightly expanded its overall sector roster by one.

The continued strengthening trend since the early February weakness 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. All 30 of those bigger sectors showed gains on the week, with none showing a loss. The week before, 29 of those sectors were winners, against only one loser.

Among specific major sectors in the latest week, bonds of petroleum refining and publishing and printing companies had the best showings. There was no downside as such, but bonds of food store operators and non-depository credit institutions had the slightest gains.

Statistical indicators of general market performance posted their ninth consecutive week of gains, including the total year-to-date return as measured by the widely followed Merrill Lynch High Yield Master II index.

Index extends gains

The Merrill index showed junk bonds with a one-week jump of 0.676% as of the close Friday, extending the previous week's 0.158% advance. The index, which has now seen 13 gains so far in 2013 against two losses, finished 2012 with 40 weekly gains versus 12 weekly losses.

The index's year-to-date return stood at 3.719% - a new peak level for 2013, and up from 3.014% at the end of the previous week. 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 105.7698 on Friday, up from 105.1939 a week earlier. Its yield to worst stood at 5.515%, down from 5.684% a week earlier, while its spread to worst over comparable Treasury issues tightened to 480 basis points from 496 bps the week before.

Refiners tops for week

Back on a sector basis, Advantage Data meanwhile showed the bonds of petroleum refining companies having had the best showing on the week among the significantly sized sectors, with gain of 0.81%.

Also showing strength in the latest week were publishers and printers (up 0.73%), precision instrument manufacturers (up 0.65%), chemical makers (up 0.64%) and food manufacturers (up 0.61%). The publishing and printing sector had been among the worst finishers the week before, with an anemic 0.09% gain, but has now been among the Top Five best performers in two weeks out of the last three.

There was no downside as such, but some sectors had smaller gains than their peers, including food stores (up 0.18%), non-depository credit institutions (up 0.23%), insurance carriers (up 0.26%), amusement companies (up 0.35%), and the primary metals processing and financial holding companies and other investment offices sectors, which were both up 0.37%.

The holding companies had been among the strongest finishers the previous week, when the sector returned 0.40%, while the insurers were there in each of the previous two weeks, with returns of 0.48% and before that, 0.23%.

Food stores in lead for year

Fifteen weeks into 2013, the food stores sector remained the leader among the key sectors on a year-to-date basis for a 13th straight week, posting a cumulative return of 9.02%. Publishing and printing and the precision instrument manufacturers each moved up one notch, to second- and third-best, respectively, with year-to-date gains of 5.67% and 5.19%. After three weeks in second place, lodging tumbled two notches to fourth-best, up 4.91% on the year so far. Paper manufacturing has returned 4.15%.

Among the year-to-date underachievers was telecommunications (up 2.46%), which was at the bottom for a fifth consecutive week. That sector was joined by transportation equipment manufacturers (up 2.67%), real estate (up 2.86%), wholesale durable goods distributors (up 2.88%) and non-depository credit institutions (up 3.01%). All but the latter grouping were among the weakest-performing sectors for the year during the previous week as well.

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