Advantage Data: Junk market major sectors' rebound rolls on; coal climbs; brokers battered

By Paul Deckelman

New York, April 7 - The high-yield market posted its third consecutive weekly gain last week, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc., as it continued to rebound from a rare recent loss.

That downturn, during the week ended March 14, had been just its first setback since the week ended Jan. 31 and had snapped a five-week winning streak.

Since the beginning of this year, broad-market gains have now been seen in 12 weeks, versus the two downturns, the only ones to have been recorded so far this year.

In the latest week, 53 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 five ending in the red.

That count was about steady from what it had been during the week ended March 28, when 54 of the sectors had posted gains, three ended in the red and one sector was unchanged on the week, registering neither a gain nor a loss.

A separate, more focused selection of just 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, also held steady this past week, with 28 of the 30 closing in the black, while two finished in the red.

That was essentially where things had been the previous week, when 27 of the sectors had shown gains, two had posted losses and one was unchanged.

In the latest week, the recently beleaguered coal mining sector put on a burst of strength and was the best performer among the significantly sized sectors, while the financial brokers, dealers and exchanges sector did the worst.

But coal, despite its strong performance on the week, continues to suffer the hangover of the previous four straight weeks of poor showings and remained the worst year-to-date performer among those major sectors for a fifth consecutive week, while petroleum refining took over as the best year-to-date performer so far among the sectors, displacing the previous week's year-to-date champion, paper manufacturing.

Index extends gains

In line with the continued strong market performance shown by the behavior of the industry sectors, statistical indicators of general market performance meanwhile were higher across the board last week versus the previous Friday for a third consecutive week, after having been lower for the two weeks before that.

Among those indicators was the widely followed Merrill Lynch High Yield Master II index, which posted a third consecutive weekly gain after two straight weekly losses. It rose by 0.335%, on top of the 0.212% improvement in the week ended March 28.

The index has now seen 10 weekly gains in 2014, against four losses. In 2013, the index showed 33 weekly gains against 19 losses, while in 2012, it had notched 40 gains and 12 losses.

As of Friday, the index's year-to-date return had risen to 3.238% - a new high point for the year so far - from the previous Friday's 2.893%. 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 104.6711 on Friday, up from 104.48591 the previous Friday, although it remained down from the 104.915754 seen on Feb. 28, its high point for the year. However, it stayed well up from its low for the year so far of 103.24599, set on Feb. 4, and up as well from 103.3161, where it had ended 2013.

Its yield to worst stood at 5.222%, down from 5.274% the previous Friday. However, it remained up from its lowest level for the year so far, 5.191%, recorded on Feb. 27. All of those levels were still well down from the index's high yield for the year of 5.735%, set on Feb. 4, and down as well from 5.671% at the end of 2013.

Its spread to worst over comparable Treasury issues stood at 386 basis points on Friday, in from 392 bps the previous Friday, although it was slightly higher than its tightest level for this year so far, the 383 bps recorded this past Thursday. The spread was well in versus its wide point for the year so far, 444 bps, set on Feb. 4, as well as the 418 bps spread seen on the last day of 2013.

Coal makes a comeback

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of coal mining companies up by 0.75%, the best of any of the significantly sized sectors.

Coal thus accomplished the unusual feat of going from worst to first; in the week ended March 28, the volatile sector's 0.74% loss was the worst of any of the major sectors and it had marked its fourth consecutive week at that point among the worst-performing major sectors.

Also showing strength this past week were real estate (up 0.70%), depository financial institutions (up 0.61%), holding companies and other investment offices (up 0.60%) and non-computer electronics manufacturing (also up 0.60%).

It was the second straight week among the Top Five best-performing major sectors for real estate, which had actually topped that list the week before with a gain of 0.77%. It was the third week in a row that the depository financials have been among that elite group, having been there the previous week with a 0.47% gain and in the week ended March 21 with a 0.38% advance.

The electronics manufacturers, on the other hand, had been among the Bottom Five worst-performing major sectors the week before with a meager 0.03% return.

On the downside, the financial brokers, dealers and exchanges grouping nosedived by some 2.44% on the week, clearly the worst among any significantly sized sector.

For a second consecutive week, food stores (down 0.02%) was the only other key sector finishing in the red. The Bottom Five list was rounded out by the relatively small weekly gains posted by miscellaneous retailing (up 0.14%) and by the health care and wholesale durable goods distribution sectors, each up 0.19% on the week.

The food stores sector was the only repeat visitor, ending among the laggards for a fourth consecutive week, including the March 28 week, when it had been down by 0.22%.

Refiners re-take YTD lead

With 14 weeks in the books for 2014 so far, the petroleum refining sector was showing the best year-to-date cumulative return among the significantly sized sectors, up by 4.68%, followed by paper manufacturing (up 4.50%).

Those two sectors thus continued their back-and-forth game of leapfrog; the refiners had led the papermakers during the week ended March 21, but they had traded places in the March 28 week, before switching back again in the most recent week.

Printing and publishing (up 4.02%) - which had been the year-to-date leader for seven consecutive weeks before being dethroned by the refiners during the March 21 week - remained third-best for a third straight week. Telecommunications (up 3.98%) was the fourth-best year-to-date finisher, also for a third week in a row.

Lodging (up 3.93%) moved up to fifth-best this past week, despite having not been among the year-to-date leaders the week before.

On the downside, coal mining - despite its strong gain on the week, as noted - continued to languish at the bottom with a 0.78% loss, as it remained the absolute worst performer among the major sectors year to date for a fifth straight week and for a ninth week in the last 10. It was the only key sector showing a loss for the year.

Real estate (up 1.53%), which has also turned in two consecutive strong weekly performances, as noted, also continued to lag on a year-to-date basis for a fifth straight week, having the unwanted honor of being second-worst during that time.

Other underachievers included holding companies and other investment offices (up 1.99%), third-worst for a third straight week, followed by fourth-worst food stores (up 2.30%) and fifth-worst miscellaneous retailing (up 2.39%). It was the latter sector's second straight week in that position, while the grocers had not been among the worst year-to-date finishers the week before.

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