Advantage Data: Metals processors lead junk's continued major-sector rally; metals miners off

By Paul Deckelman

New York, May 19 - The high-yield market recorded its ninth straight weekly advance last week, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Of the 59 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 56 finished in the black during the week ended Friday, while just three sectors were in the red.

That represented a strengthening of the already mostly positive trend seen the week before, ended May 9, when 49 sectors posted gains and 10 had negative results.

A majority of the sectors have now been on the plus side in 18 weeks out of the 20 weeks so far this year, versus just two weeks in which more sectors were down than up - in the weeks ended Feb. 3 and March17.

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 continued to show strength this past week, with 29 of the 30 closing in the black, while only one finished in the red.

That was mostly in line with the previous week, when 28 of the sectors had shown gains, and two were on the downside.

That more select grouping of the larger sectors generally moves up or down in tandem with the overall market, although from time to time there is a rare divergence, as happened during the week ended March 7, when those key sectors were down on the week while the overall sector roster showed more gains than losses. Those significantly sized sectors have now mostly shown gains in 17 weeks since the start of the year, versus three downturns.

In the latest week, the primary metals processing sector was the best performer among the significantly sized sectors, while metals mining had the worst showing.

The electric and gas utilities grouping was in the lead on a year-to-date basis for a second consecutive week.

Coal mining remained down at the bottom on a year-to-date basis for an eleventh straight week, and a 15h week out of the last 16.

Index extends gains

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

Among those indicators was the widely followed Merrill Lynch High Yield Master II index, which posted a ninth straight weekly gain after two successive weekly losses in early March. It rose by 0.222%, following the previous week's 0.282% gain.

The index has now seen 16 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 4.328%. It was up from the previous Friday's 4.097%% return, although down from the year-to-date peak level so far of 4.358%, recorded this past Wednesday. 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 104.9639 on Friday, up from 104.8651 the previous Friday, although it remained down from the 105.0349 seen on Wednesday, its high point for the year, which had eclipsed the previous high for the year of 104.915754, set back on Feb. 28. The price meantime 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 5.144%, down from the previous Friday's 5.179%, but still up from its lowest level for the year so far, 5.111%, set on Wednesday. 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 392 basis points on Friday, wider than the 389 bps seen the prior Friday, and wider as well than its tightest level seen so far this year, the 383 bps recorded on April 3 and again on April 22. 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.

Metals make their move

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of primary metals processing companies having risen by 0.58% the best of any of the significantly sized sectors.

Also showing strength this week were the health care and real estate sectors (each up 0.51%), electric and gas utilities (up 0.47%) and depository financial institutions (up 0.40%).

It was the fourth consecutive week among the Top Five best-finishing sectors for the utilities, which had been there the week before with a 0.57% reading, as well as during the two weeks before that. The depository financials were among the elite performers for a second straight week, having been there the week before with a 0.51% gain.

In contrast, real estate had actually been the previous week's single worst finisher among the larger sectors, losing 0.28%.

On the downside, only one sector was in the red this past week - metals mining, which lost 0.19%.

The week's Bottom Five list of the worst-performing significantly sized sectors was rounded out by groupings showing considerably smaller weekly returns than their peers - food stores and coal mining (both up 0.03%) and the building construction and holding companies and other investment offices sectors (both up 0.07%).

It was the builders' third consecutive week among the worst finishers, the sector's having been there the week before with a 0.09% deficit.

On the other hand, coal mining had, in fact, been the previous week's best-performer among the key sectors, when it jumped by 1.16%.

Utilities hold YTD lead

With 20 weeks in the books for 2014 so far, electric and gas utilities - one of the week's stronger performers in each of the last four weeks, as noted - continued as the best-performing major sector, holding the top spot for a second consecutive week with a 6.90% cumulative return.

Paper manufacturing (up 5.91%) was in the runner-up slot for a second straight week, while petroleum refining (up 5.82%) was in third place for a third week in a row.

Printing and publishing (up 5.23%) was fourth-strongest for a second straight week, while industrial machinery and computer manufacturing moved up to fifth-best with a 5.11% year-to-date return, even though the sector had not been among the leaders the week before.

On the downside, coal mining continued to languish at the bottom of the pile with a meager 0.17% gain on the year, as it remained the absolute worst performer among the major sectors year to date for an 11th straight week and for a 15th week in the last 16. It did stay out of the red - though just barely - for a second consecutive week, after having shown a year-to-date loss for the previous eight weeks, from the week ended March 14 through the week ended May 2.

Also among the underachievers, real estate (up 2.40%) was second-worst for a fourth week in a row.

The financial broker, dealer and exchanges sector (up 2.50%) was third-worst on the year for a third straight week.

Automotive services (up 3.01%) and metals mining (up 3.03%) fell to the fourth- and fifth-worst key sectors on the year, despite having not been among the worst cumulative performers the week before.

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