Advantage Data: Electronics makers, coal miners lead as major junk sectors add to gains

By Paul Deckelman

New York, May 6 - The high-yield market posted its 12th 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 16th 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 23rd gain in the last 28 weeks, against five losses during that timeframe.

For a second consecutive week, 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. There were just two sectors ending in the red, up from only one sector the week before, ended April 26; in the interim, Advantage Data recalculated and slightly expanded its sector roster to 66 from 65 previously.

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. For a second consecutive week, all 30 of those bigger sectors showed gains on the week, against no losses.

Among specific major sectors in the latest week, bonds of electrical and electronic equipment manufacturers had the best showing for a second straight week, followed by coal mining concerns. For a second straight week, there were no key sectors ending in the red in the past week, although some lagged all of the other significantly sized sectors, notably non-depository credit institutions, also for a second straight week, and miscellaneous retailing.

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, posted a second straight week of gains, after having seen a rare downturn the week before, ended April 19, which had been the index's first loss after nine consecutive weeks of gains before that.

Index pushes higher

The Merrill index showed junk bonds with a one-week rise of 1.002% as of the close Friday, on top of its 0.746% rise the previous week. Those advances stood in contrast to the rare loss of 0.999% in the April 19 week, its first such downturn after nine previous weekly gains. The index, which has now seen 15 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 5.425%, a new peak level for the year, up from 4.379% 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 106.9262 on Friday, up from 106.16987 a week earlier. Its yield to worst stood at 5.082%, down from 5.287% a week earlier. Friday's yield marked a new lowest level on record. Its spread to worst over comparable Treasury issues tightened to 438 basis points - a new tight level for the year - from 461 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 1.59%. It was the sector's second-consecutive index-best showing, on top of the previous week's 0.97% gain.

Also showing strength were coal mining companies (up 1.23%), precision instrument manufacturers (up 1.20%), automotive services providers (up 1.06%) and building construction concerns (up 1.02%).

It was the second straight week among the top finishers for the coal miners, who had been there the week before with a gain of 0.75%.

With all 30 of the significantly sized sectors having shown 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 0.17%), miscellaneous retail (up 0.35%), lodging and insurance carriers (both up 0.52%) and real estate (up 0.57%).

It was the second consecutive week in which non-depository financials had the worst performance of any major sector, following the previous week's 0.21% return. It was also real estate's second week among the laggards, the group having been there the week before with a 0.35% return.

Food stores in lead for year

Eighteen weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 16th straight week, posting a cumulative return of 16.67%, the first, and so far the only major sector to hit double digits on a percentage basis this year.

Publishing and printing grabbed second place with a 7.59% return, followed by the electronic equipment makers (up 6.87%), on the strength of their robust showings the past two weeks. Then came the precision instrument manufacturers (up 6.42%) and financial brokers and exchanges (up 5.94%). The latter two sectors had also been among the best year-to-date performers the week before.

Among the year-to-date underachievers, non-depository credit institutions - the worst weekly finisher the past two weeks as noted - came in right at the bottom, with a 3.28% return so far this year.

Others doing not much better included transportation equipment manufacturers (up 3.56%), metals mining (up 3.72%), real estate (3.87%) and telecommunications (up 3.95%). All of those sectors other than real estate were among the worst year-to-date finishers the week before, with telecom having been the worst of the bunch for seven straight weeks before improving a little in the latest week.

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