Advantage Data: Financial brokers, auto services the worst amid major junk sectors plunge

By Paul Deckelman

New York, June 3 - The high-yield market suffered its third straight weekly setback in the period ended Friday, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That followed downturns in the weeks ended May 24 and May 17; the latter setback had snapped a winning streak of 13 consecutive weeks before that in which it had shown gains, dating back to the week ended Feb. 15, when junk had broken out of a two-week slump.

The latest results marked only the fifth loss that the junk market has seen so far this year, against 17 weekly gains so far in 2013. Aside from the latest trio of losses, the other two had occurred back-to-back in the weeks ended Feb. 1 and Feb. 8.

On a longer-term basis, last week marked just the eighth loss in the last 32 weeks, versus 24 gains during that time. Besides the now-ended 13-week winning streak, a 10-week stretch of consecutive weekly gains between last November and the week ended Jan. 25 also helped to account for much of those gains.

In the latest week, 56 of the broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the red, with eight sectors ending in the black. That extended the negative trend seen the week before, when 52 of those sectors suffered losses and nine posted gains. In the interim, Advantage Data recalculated and expanded its roster of sectors.

The overall market's third straight week on the downside was also 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 key sectors ended in the red this past week, with none finishing in the black, extending and intensifying the trend seen the week before, ended May 24, when for a second consecutive week, 28 of those key sectors closed the week on the downside, with only two on the upside.

Among specific major sectors in the latest week, bonds of financial brokers, dealers and exchanges and automotive service providers had the worst showing among the significantly sized sectors. None of those sizable sectors actually finished in the black this week, although machinery and computer manufacturing companies and publishers and printers suffered smaller losses than the other key sectors.

Statistical indicators of general market performance remained lower across the board, including the total year-to-date return as measured by the widely followed Merrill Lynch High Yield Master II Index; the latter market measure showed its third consecutive weekly loss.

Index retreat continues

The Merrill index showed junk bonds with a one-week fall of 0.744% as of the close Friday, on top of its loss of 0.295% the previous week and 0.338% in the week ended May 17. The index has now seen 16 gains so far in 2013 against six losses. It had finished 2012 with 40 weekly gains versus 12 weekly losses.

As of Friday, the index's year-to-date return stood at 4.249%, down from 5.03% at the end of the previous week, and down as well from its peak level for the year so far of 5.835%, recorded on May 9. 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 104.967 on Friday, well down from 106.071 a week earlier. Its yield to worst stood at 5.70%, up from 5.343% a week earlier and well up from the May 9 low of 4.986%, its lowest-ever level on record. Its spread to worst over comparable Treasury issues widened to 469 basis points from 451 bps the week before, and from 427 bps, the tightest level so far this year, also set on May 9.

Brokers bashed around

Back on a sector basis, Advantage Data meanwhile showed the bonds of financial brokers, dealers and exchange companies showing the biggest loss of any of the significantly sized sectors, as they slid by 1.03% in the week ended Friday. It was the second straight week the sector had been among the Bottom Five worst finishers, having also been there the week before with a 0.38% loss.

Other major sectors showing sizable losses in the latest week included automotive services such as vehicle rental companies (down 0.94%), electric and gas utilities (down 0.84%), telecommunications (down 0.83%) and chemical manufacturing (down 0.73%).

Like the brokers, telecom was also among the biggest losers for a second straight week, having been there the week before with a 0.40% downturn. However, automotive services had been among the sectors with the smallest losses the previous week, when the grouping lost 0.11%.

There was no upside as such this week, as all of the significantly sized sectors finished in the red, as noted. But among those who were the best performers on a relative basis, posting the smallest losses, were machinery and computer manufacturing (down 0.33%), publishing and printing (down 0.35%), wholesale durable goods distributors (down 0.38%), holding companies and other investment offices (down 0.39%) and metals mining (down 0.40%).

It was the third straight week among the Top Five best performers for the durable goods distributors and the second straight week among the elite for holding companies and investment offices, which had each been there the week before when they were up 0.03% and down just 0.09%, respectively. The machinery and computer makers and metals mining groups had meanwhile both been among the worst performers the week before, with losses of 0.38% and 0.47%, respectively.

Food stores in lead for year

Twenty-two weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 20th straight week, posting a cumulative return of 12.86%. It was the first and so far remained the only major sector to hit double digits on a percentage basis this year.

Precision instrument manufacturing moved up by two slots into second place with a 6.75% return on the year so far, followed by insurance carriers, in third place for a second straight week with a 6.67% return. Then came non-computer electronic manufacturing, which fell two notches to fourth place at 6.23%, and publishing and printing, which had not been among the prior week's leaders, at 5.70%.

Among the year-to-date underachievers, telecommunications had the smallest cumulative return of any major sector for a second consecutive week, with just a 2.72% gain for 2013 so far.

That was followed by transportation equipment manufacturing and metals mining (both up by 2.99%), real estate (up 3.28%) and automotive services (up 3.43%). All but auto services had also been among the worst year-to-date finishers the previous week as well.

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