Advantage Data: Precision instrument makers, coal miners the worst as major junk sectors plunge

By Paul Deckelman

New York, June 10 - The high-yield market suffered its fourth 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.

The current downward skid began during the week ended May 17, which had snapped a winning streak of 13 consecutive weeks before that in which junk had shown gains, dating back to the week ended Feb. 15, when it had broken out of a two-week slump.

While the recent trend has been decisively negative, the latest results actually marked only the sixth loss that the junk market has seen so far this year, against 17 weekly gains for 2013.

Aside from the latest quartet of weekly losses, two others had occurred back to back in the weeks ended Feb. 1 and Feb. 8. On a longer-term basis, last week marked the ninth loss in the last 33 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, 58 of the broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the red, with five sectors ending in the black. That extended the negative trend seen the week before, when 56 of those sectors suffered losses and eight posted gains. In the interim, Advantage Data recalculated and slightly contracted its roster of sectors.

The overall market's fourth 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. For a second consecutive week, all 30 of those key sectors ended in the red this past week, with none finishing in the black.

Among specific major sectors in the latest week, bonds of precision instrument manufacturers and coal-mining concerns had the worst showings. None of those sizable sectors actually finished in the black this week, as noted, although health care providers and food store operators 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 fourth consecutive weekly loss.

Index retreat continues

The Merrill Lynch index showed junk bonds with a massive one-week swoon of 1.486% as of the close Friday - about twice the size of its already hefty 0.744% loss recorded the previous week, ended June 3. The index has now seen 16 gains so far in 2013 against seven 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 2.899%, well down from 4.249% at the end of the previous week, and 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 103.4618 on Friday, well down from 104.967 a week earlier.

Its yield to worst stood at 6.004%, up from 5.70% a week earlier and down only a little from its most recent high point for the year, 6.16%, reached on Thursday. It had hit its low yield for the year and lowest-ever as well of 4.986% just about a month earlier, on May 9.

The index's spread to worst over comparable Treasury issues widened to 494 basis points from 469 bps the week before and was only somewhat tighter than its new 2013 wide point of the year of 514 bps, set on Thursday. Its tightest level for the year so far has been 427 bps, also set on May 9.

Precision instruments hit

Back on a sector basis, Advantage Data meanwhile showed the bonds of precision instrument manufacturers - chiefly medical equipment makers - showing the biggest loss of any of the significantly sized sectors, as they slid by 1.34% in the week ended Friday.

Other major sectors showing sizable losses in the latest week included coal-mining companies (down 1.08%), electric and gas utilities (down 0.92%), telecommunications (down 0.90%) and the chemical manufacturing and non-computer electronics manufacturing sectors, which were both down by 0.89%.

The chemical makers and utility companies were both among the Bottom Five worst performers for a second consecutive week, having been there the week before as well with losses of 0.73% and 0.84%, respectively, while it was telecom's third straight week there; the latter sector had lost 0.83% the week before.

There was no upside as such this week, as all of the significantly sized sectors finished in the red for a second straight week, as noted. But among those who were the best performers on a relative basis, posting the smallest losses, were health care providers (down 0.17%), food store operators (down 0.30%), transportation equipment manufacturers (down 0.38%), financial brokers, dealers and exchanges (down 0.41%) and non-depository credit institutions (down 0.50%).

The brokers and dealers sector had been among the worst performers the week before, when it slid by 1.03%.

Food stores in lead for year

Twenty-three weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 21st straight week, posting a cumulative return of 16.26%. It was the first and has so far remained the only major sector to hit double digits on a percentage basis this year.

Insurance carriers moved up by one position in the rankings to second-best with a 5.64% year-to-date return, after having been third-best in the two previous weeks. Publishing and printing advanced two slots, to third place, with a 5.05% return so far. Also showing strength on a year-to-date basis were lodging (up 4.96%) and health care (up 4.72%), neither of which were among the 2013 leaders the previous week.

Among the year-to-date underachievers, telecommunications had the smallest cumulative return of any major sector for a third consecutive week, with just a 2.16% gain for 2013 so far.

That was followed, in ascending order, by electric and gas utilities (up 2.34%), real estate (up 2.38%), metals mining (up 2.73%) and transportation equipment manufacturing (up 2.77%). All but the utilities had also been among the worst year-to-date finishers the previous week as well.

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