Advantage Data: Refiners, auto services led major-sector rebound last week, paper makers pounded

By Paul Deckelman

New York, Aug. 23 - The high-yield market was back in the black during the week ended Friday, according to weekly industrial-sector bond-performance statistics supplied to Prospect News by Advantage Data Inc.

The strength was in contrast to the sharp retreat seen the previous week, ended Aug. 13, which had, in turn, broken a string of five consecutive gains dating back to the week ended July 9. Advancing sectors have now outpolled the losing sectors in two weeks out of the last three and in eight weeks out of the last 10.

Sixty-three of the 72 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black in the latest week, with just nine ending in the red. That reversed the trend seen in previous week, when 49 sectors had showed negative returns and 23 posted gains.

It marked a return to the kind of lopsided positive sector breakdowns seen over the five weeks before that, with more than 60 sectors finishing on the upside in each of those five weeks.

Out of the 30 most significantly sized sectors, as measured by the number of issuers, the collective number of issues and the total face amount of securities tracked, 25 showed gains in the latest week, with just five posting losses, a sharp rebound from the week before, when 27 of the sectors ended in the red and only three finished in the black.

The biggest gainers in the latest week among those major sectors were the bonds of petroleum refiners, automotive services providers like car-rental companies, transportation equipment manufacturers and chemical makers. The biggest losers were paper manufacturers, lodging providers, metals mining companies and publishers.

On a statistical basis, the junk market's year-to-date performance, as measured by the widely followed Merrill Lynch High Yield Master II index, was up from the previous week, when it had retreated from its highs for the year for the first time in six weeks, but it remained below its 2010 peak level.

Refiners lead rally

Among the specific significantly sized sectors, the single best finisher this past week was petroleum refining, which gained 1.43%. Automotive services was up 0.85%, transportation equipment manufacturing up 0.67% and chemical manufacturing up 0.58%. Also showing strength were insurance carriers (up 0.56%), which have now been among the elite performers for four straight weeks, as well as electric and gas services (up 0.55%).

On the downside, paper manufacturers lost 1.04%, the worst of any significantly sized sector. Lodging was down 0.65%, its third straight week among the worst laggards, while metals mining fell 0.42%, publishing was down 0.39%, and amusement off 0.11%, its second straight week among the underperformers.

Financials top yearly results

On a year-to-date basis so far, financial sectors for the most part continue to show the strongest performance among the significantly sized sectors and have matched or surpassed the peak levels seen earlier in the year - led by the bonds of insurance carriers (up 19.17%), depository financial institutions (up 16.89%), non-depository institutions (up 13.43%), brokers and exchanges (up 9.64%), investment and holding offices (up 9.36%) and real estate (up 8.06%).

Other notable cumulative gainers with 33 weeks now in the books and 19 to go include transportation equipment manufacturing (up 10.55%), electronics manufacturing (up 10.52%), metals mining (up 9.47%), amusement (up 9.29%) and wholesale durable goods distributors (up 8.33%).

No significantly sized sectors were in the red on a cumulative basis this past week. Food stores (up 3.61%), the week's biggest loser among the major sectors, paper manufacturing (up 3.84%) and publishing (up 4.20%) had relatively modest year-to-date net advances.

Key market indicator comes back

Looking at the overall domestic high-yield market, junk bonds, as measured by the Merrill Lynch High Yield Master II Index, were on the rebound after the previous week's decline, which had been its first trip lower after five straight weeks of gains dating back to early July.

The index rose 0.297% in the latest week, and its year-to-date return as of Friday stood at 8.58% - up from 8.259% at the end of the previous week, though still down from its peak level for the year so far, 9.085%, recorded Aug. 9. However, it remained well above its low for the year, a 0.357% loss recorded in the week ended Feb. 12.

The average price of a high-yield issue covered by the Master II stood at 98.497 at Friday's close, with a yield to worst of 8.29% and a spread to worst of 686 basis points over comparable Treasuries, versus a price of 98.361, a yield of 8.39% and a spread of 691 bps at the end of the previous week.

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