Advantage Data: Electronics makers, publishing lead as major junk sectors augment gains

By Paul Deckelman

New York, April 29 - The high-yield market posted its 11th 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 15th 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 22nd gain in the last 27 weeks, against five losses during that timeframe. Together with the current streak, a 10-week stretch of consecutive weekly gains between last November and the week ended Jan. 25 also accounted for much of those gains.

Some 64 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 only one ending in the red.

That represented a notable recovery from the rare lackluster performance seen the previous week, ended April 19, when 44 sectors showed gains and 21 posted losses, temporarily departing from the pattern of very robust gains seen in the several weeks before that.

The continued strong trend in the overall market since the early February weakness 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, although as in the case of the overall sector performance, there was marked improvement in the latest week from the prior week's backsliding. All 30 of those bigger sectors showed gains on the week, against no losses, strengthening from the 25-to-5 positive breakdown seen the week before.

Among specific major sectors in the latest week, bonds of electrical and electronic equipment manufacturers and publishing and printing companies had the best showings. No key sectors ended in the red in the past week, although three financial sectors - non-depository and depository institutions, plus real estate - lagged all of the other significantly sized sectors.

Statistical indicators of general market performance, including the total year-to-date return as measured by the widely followed Merrill Lynch High Yield Master II index, were back on the upside this past week, after having seen a rare downturn the week before, their first loss after nine consecutive weeks of gains before that.

Index back on track

The Merrill index showed junk bonds with a one-week rise of 0.746% as of the close Friday, in contrast to the previous week's rare loss of 0.999%, its first such downturn after nine previous weekly gains. The index, which has now seen 14 gains so far in 2013 against three losses, had finished 2012 with 40 weekly gains versus 12 weekly losses.

As of Friday, the index's year-to-date return stood at 4.379%, a new peak level for the year, up from 3.607% at the end of the previous week. The index had finished 2012 with a cumulative return of 15.583%, just a little below its peak for the year of 15.589%.

Among its other components, the index showed an average price of 106.9876 on Friday, well up from 105.5138 a week earlier. Its yield to worst stood at 5.287%, down from 5.494% a week earlier. Friday's yield, according to published sources, was the lowest on record. Its spread to worst over comparable Treasury issues tightened to 461 basis points - a new tight level for the year - from 477 bps the week before.

Electronic equipment excels

Back on a sector basis, Advantage Data meanwhile showed the bonds of electronic and electrical equipment manufacturers, other than computer-makers, having had the best showing on the week among the significantly sized sectors, with a gain of 0.97%.

Publishing and printing companies were not far behind, at 0.90%. They were followed by telecommunications (up 0.76%), coal mining (up 0.75%), and three sectors each posting a gain on the week of 0.71% - amusement and recreation providers, financial brokerages and exchanges, and paper manufacturing.

It was the second straight week among the top performers for amusement and for the brokers and exchanges group; each had been among the Top Five the week before with respective gains of 0.28% and 0.23%.

Coal mining, on the other hand, had been among the worst sectors the prior week, when it had lost 0.31%.

With all 30 of the significantly sized sectors having showed positive returns on the week, there was no downside, as such, but among the sectors showing the smallest gains on the week were non-depository credit institutions (up 0 .21%), depository financials, real estate and food stores (all up 0.35%) and petroleum refining (up 0.36%).

It was a comedown for the food stores, which had actually been the best-performing major sector in the week ended April 19, with a 0.35% gain, and for the petroleum refiners, which had been among the elite performers in each of the previous two weeks, including a 0.25% gain in the April 19 week.

Food stores in lead for year

Seventeen weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 15th straight week, posting a cumulative return of 10.50%, the first major sector to hit double digits on a percentage basis this year.

Precision instrument manufacturing moved up a notch to second place with a 5.21% return, after having been third in each of the previous two weeks. Financial brokers and exchanges were returning 5.04% on the year so far, lodging - the previous week's Number-Two - was at 4.90% and paper manufacturing at 4.84%.

Among the year-to-date underachievers, telecommunications was at the bottom of the pile for a seventh consecutive week, returning just 3.01%. That sector was joined by transportation equipment manufacturing (up 3.09%), metals mining (up 3.33%), machinery and computer manufacturing (up 3.37%) and the week's worst finisher, non-depository credit institutions (up 3.48%).

All but that latter grouping had been among the weakest-performing sectors for the year during the previous week as well.

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