Advantage Data: Junk major sectors rebound; brokers perform best, coal mining worst

By Paul Deckelman

New York, Feb. 10 - The high-yield market got back in the black during the week ended Friday, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc., as junk shook off the rare loss seen in the previous week, ended Jan. 31.

That earlier downturn had not only been its first weekly loss for 2014, but also snapped a winning streak before that of four consecutive weeks since the beginning of the year and 11 straight weeks of gains dating back to early November of 2013.

In the latest week, 44 out of the 59 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black, with 12 sectors ending in the red and three sectors closing unchanged, signifying neither a gain nor a loss on the week.

That represented a sharp rebound from the negative result seen the week before, when 40 sectors out of the 61 measured posted losses, with 20 other sectors showing gains and one sector unchanged. In the interim, Advantage Data recalculated and slightly contracted its roster of sectors.

The same improvement was seen 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. In the latest week, 22 of the 30 sectors closed in the black, six finished in the red and two were unchanged - versus the previous week, when 22 of those major sectors had closed in negative territory, eight had positive returns and none were unchanged.

In the latest week, financial brokers, dealers and exchanges was the best-performer among the significantly sized sectors, while coal mining was the worst.

Coal also had the dubious honor of being the worst performer so far on the year, while printing and publishing was the best.

Index bounces back

Statistical indicators of general market performance meanwhile were mixed for a second consecutive week, after having turned lower across the board for the first time this year the week before that.

The total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, showed its first weekly gain after two straight weekly losses, rising by 0.248%, in contrast to the 0.032% downturn seen the previous week, ended Jan. 31. That loss, and a 0.283% retreat recorded in the week ended Jan. 24, had snapped a streak of 10 consecutive Fridays during which the index had finished higher than the previous Friday, dating back to the week ended Nov. 15, 2013.

The index has now seen four weekly gains in 2014, against that pair of losses. In 2013, the index showed 33 weekly gains against 19 losses, versus 2012, when it notched 40 gains and 12 losses.

As of Friday, the index's year-to-date return had rebounded to 0.989% from 0.74% the previous Friday, although it remained down from its high point for 2014 so far, 1.185%, recorded on Jan. 22. In 2013, the index had ended at 7.419%, its high point for the year - well above its 2013 low point of 0.384%, recorded on June 25, 2013, but well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 103.5720, up from 103.455 the week before, and up as well from its low for the year so far of 103.24599, set just last Tuesday, although it was down from 104.1083 on Jan. 22, its high point for the year. However, it remained up from the 2013 year-end level of 103.3161; that latter figure, meanwhile, was well below the highest average price for 2013, 107.222488, set on May 9 of that year.

The index's yield to worst stood at 5.646%, down from the previous Friday's 5.662% and down as well from its high for the year of 5.735%, set last Tuesday. It was meanwhile well up from 5.386% on Jan. 22, its low point for 2014 so far, although it remained below 5.671% at the end of 2013. While that year-end figure had come in markedly from its high point for 2013 of 6.853%, set on June 25, it still remained above its low yield for the year of 4.986% on May 9 - which was also the lowest all-time yield as well.

Its spread to worst over comparable Treasury issues stood at 435 basis points on Friday, slightly wider than the previous Friday's 434 bps, although tighter than its wide point for the year so far, 444 bps, set last Tuesday. It remained substantially wide of 398 bps on Jan. 22, its tightest level for 2014, as well as from 418 bps on the last day of 2013. In 2013, the spread came in smartly from its wide point of the year of 536 bps, set on June 25, but still finished a little above its 2013 tight point of 414 bps on Dec. 30.

Brokers best; coal crumbles

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of financial brokers, dealers and exchanges (up 0.55%) with the best performance among any of the significantly sized sectors.

Also showing strength were primary metals processing (up 0.40%), health care and non-depository credit institutions (both up 0.32%) and insurance carriers (up 0.26%).

It was a solid rebound for the metals processors and the non-depository credits; both had been among the worst sectors the week before, with identical 0.26% losses.

On the downside, coal mining (down 0.94%) was the single worst performer among the major sectors for a second consecutive week, having also had that unwanted distinction the week before with a 0.74% loss. Overall, it was coal's fourth straight week among the worst finishers.

Other losers on the week included lodging (down 0.47%), petroleum refining (down 0.08%), non-computer electronics manufacturing (down 0.06%) and automotive services (down 0.03%).

It was the second straight week among the worst laggards for the electronics manufacturers, who had also been there the week before with a 0.27% loss. But the lodging and refining sectors had been among the best performers the week before with gains of 0.16% and 0.33%, respectively. Lodging, in fact, had been the best finisher of any of the key sectors that week.

Printers pop; coal in a hole

With six weeks in the books for 2014 so far, printing and publishing (up 3.71%) was the best year-to-date performer among the significantly sized sectors for a second week in a row. Paper manufacturing (up 3.53%) was in the runner-up slot, also for a second straight week.

Third-best petroleum refining (up 2.53%) and number-four health care (up 1.89%) each moved up by one notch on the week, from fourth-best and fifth-best, respectively, the week before. Lodging (up 1.58%) slipped two positions to just fifth-strongest from third-best the week before.

On the downside, the coal mining sector was both the week's worst performer and the worst year-to-date major sector for a second consecutive week, ending the week down 1.66% for the year so far.

Real estate also slipped into the red on the year (down 0.18), placing it in the second-worst position, while miscellaneous retailing (up 0.05%) was third-worst on the year, both for a second straight week.

Rounding out the year-to-date underachievers were automotive services, fourth-worst with just a 0.36% gain and food stores, fifth worst with a 0.50% year-to-date return. Food stores actually improved by one notch, relatively speaking, from fourth-worst the week before, while auto services had not been among the worst year-to-date sectors the previous week.

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