Advantage Data: Junk major sectors continue surge; brokers best, refining worst

By Paul Deckelman

New York, Feb. 18 - The high-yield market was on the upside for a second consecutive week, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc. During the week ended Friday, junk continued to shake off the rare loss seen in the week ended Jan. 31.

That earlier downturn had not only been its first weekly loss for 2014 but had 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. Since the beginning of the year, gains have now been seen in six weeks, versus the one downturn.

In the latest week, 56 out of the 58 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black, with only two sectors ending in the red.

That represented a solid improvement from the result seen the week before, ended Feb. 7, when 44 sectors out of the 59 measured posted gains, with 12 other sectors showing losses and three sectors unchanged, signifying neither a gain nor a loss on the week. 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, 29 of the 30 sectors closed in the black, and just one finished in the red - versus the previous week, when 22 of those major sectors had closed in positive territory, six had negative returns and two were unchanged.

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

Printing and publishing remained the best performer among the major sectors so far on the year, while coal continued to slog on as the worst year-to-date performer.

Index rise continues

Statistical indicators of general market performance meanwhile were higher across the board versus the previous Friday, after having been mixed for two consecutive weeks before that.

The total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, showed its second weekly gain after two straight weekly losses, rising by 0.547%, on top of the previous week's 0.248% improvement.

Those gains stood in contrast to the 0.032% downturn seen in the week ended Jan. 31 and a 0.283% retreat recorded in the week ended Jan. 24, which had 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.

The index has now seen five 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 firmed to 1.542% - its fourth consecutive new high point for 2014 so far. It was up from 0.989% the previous Friday. In 2013, the index had ended at 7.419%, its high point for the year, although that was well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 104.0076 on Friday, up from 103.5720 the week before. It was up as well from its low for the year so far of 103.24599, set on Feb. 4, although it was down from 104.1083 on Jan. 22, its high point for the year. It was also up from 103.3161 on the last day of 2013.

Its yield to worst stood at 5.47%, down from the previous Friday's 5.646% and down as well from its high for the year of 5.735%, set on Feb. 4. It was meanwhile still 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.

Its spread to worst over comparable Treasury issues stood at 416 bps, considerably tighter than the previous Friday's 435 basis points and much tighter still than its wide point for the year so far, 444 bps, set on Feb. 4. It remained wide of the 398 bps notched on Jan. 22, its tightest level for 2014. The spread had been 418 bps on the last day of 2013.

Brokers on top again

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of financial brokers, dealers and exchanges (up 0.72%) with the best performance among any of the significantly sized sectors for a second consecutive week; in the week ended Feb. 7, the sector had led its peers with a 0.55% return.

Also showing strength were telecommunications (up 0.67%), food stores (up 0.63%), non-computer electronics manufacturing (up 0.62%) and oil and natural gas exploration and production (up 0.60%).

The electronics manufacturers rebounded smartly, after having been among the Bottom Five worst-performing sectors the previous week with a 0.06% loss.

On the downside, petroleum refining (down 0.61%) was the only significantly sized sector actually posting a loss this past week. It was the sector's second straight week among the losers, having also been there the week before with a 0.08% deficit.

With only refining finishing in the red this past week, the list of the worst performers was filled out by sectors that merely had considerably smaller returns than all of the others, including wholesale durable goods distributors (up 0.09%), insurance carriers (up 0.20%), financial holding companies and other investment offices (up 0.21%) and the chemical manufacturing and transportation equipment manufacturing sectors, both of which were up by 0.22%.

It was a comedown for the insurers, who had been among the Top Five best performers the previous week with a 0.26% gain.

Printers, paper strengthen

With seven weeks in the books for 2014 so far, printing and publishing (up 4.81%) was the best year-to-date performer among the significantly sized sectors for a third week in a row. Paper manufacturing (up 3.69%) was in the runner-up slot, also for a third straight week.

Third-best health care (up 2.72%) and number-four lodging (up 2.42%) each moved up by one notch on the week, from fourth-best and fifth-best, respectively, the week before. Telecom (up 2.14%), not previously among the year-to-date leaders, improved to fifth-best.

On the downside, the coal mining sector was the worst year-to-date major sector for a third consecutive week, down 1.04% for the year so far, although that represented an improvement over the previous week's 1.66% cumulative loss.

Petroleum refining, the week's only actual loser, as noted, fell to second-worst on the year with a 0.44% return.

Rounding out the year-to-date underachievers were third-worst food manufacturing (up 0.52%), fourth-worst automotive services (up 0.98%) and fifth-worst non-depository credit institutions (up 0.99%). Automotive services held its not-terribly desirable position for a second straight week, while the petroleum refiners, the food manufacturers and the non-depository credit group had not been among the worst laggards the week before.

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