Advantage Data: Chemical makers, amusement lead as junk major-sectors rebound rolls on

By Paul Deckelman

New York, April 2 - The high-yield market posted gains for a third consecutive week, according to sector-tabulated bond-performance statistics supplied to Prospect News by Advantage Data Inc.

That continued a rebound begun in the week ended March 16, when junk got back in the black after having suffered a downturn the week before that, ended March 9 - the first such retreat of 2012 after nine straight advances that started the year.

Of the 71 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 54 finished in the black last week and 14 sectors were in the red; three other sectors did not show enough statistically meaningful activity to produce any kind of results.

That represented a continuation and strengthening of the trend seen the week before, ended March 23, when 45 sectors posted gains, 24 showed losses and another three had no results. In the interim, Advantage Data recalibrated its index, dropping one sector to reduce the total number tracked to 71 from the prior week's 72.

In the latest week, 27 out 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 - ended in the black, against just three in the red. That considerably intensified the only modestly positive trend seen the week before, when 17 of the major issues were up on the week and 13 were down.

Among specific major sectors in the latest week, bonds of chemical manufacturers and amusement providers had the best showing.

On the downside, coal mining concerns and metals miners turned in the worst performance among the majors.

Statistical indicators of overall market performance also pointed higher on the week; the market's total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, showed a week-ending gain on Friday, recovering from its downturn in the March 23 week.

Index bounces back

The Merrill Lynch index showed junk bonds with a one-week rise of 0.116% as of Friday. The week before, the index had seen a 0.079% one-week loss.

The gain in the latest week lifted the index's year-to-date return to 5.148%, up from 5.027% the prior week, although it still remained down from its peak level for the year so far, 5.361%, seen on Friday, March 2, which was also the highest level the index had hit since early last August.

Despite the week-to-week gain in the 2012 return so far, other components of the Merrill Lynch index were mixed on the week. As of Friday, the index showed an average price of 101.359, a yield to worst of 7.15% and a spread to worst of 609 basis points over comparable Treasuries, versus the previous week's price of 101.394, a yield of 7.183% and a spread of 608 bps.

Chemicals, amusement gain

Back on a sector basis, Advantage Data meanwhile showed bonds of chemical manufacturers with the best performance among the major sectors last week, when the group was up by 0.55%. Amusement companies were just a tad behind, with a 0.54% gain. It was a solid rebound for the chemical companies, which had been among the worst finishers in the week ended March 23, when they lost 0.14%.

Other strong performers in the latest week included financial brokers and exchanges (up 0.49%), electronics manufacturers (up 0.48%) and metals processing companies (up 0.40%).

On the downside, coal did the worst among any of the significantly sized sectors, tumbling by 1.34% on investor angst over an Environmental Protection Agency announcement of proposed tougher anti-emissions regulations for coal-fired power plants. However, the sector had already been on the slide, losing ground in each of the previous four weeks, including a 0.62% drop in the March 23 week, on market expectations that draconian new rules were, in fact, on the way.

Other losers on the week included metals mining (down 0.80%) and precision instrument manufacturing (down 0.05%).

The week's roster of underachievers was joined by several sectors posting considerably smaller-than-average gains versus their peers - food manufacturing (up 0.04%) and the publishing and oil and gas exploration and production sectors, both of which edged up by 0.05%.

Metals mining had been among the Bottom Five the week before, when the sector lost 0.37%.

Depositories in lead for year

Thirteen weeks into 2012, depository financial institutions moved into the top spot in terms of year-to-date returns among the significantly sized sectors, registering a 10.41% gain. The mostly banking-industry sector had been in the runner-up slot in the two previous weeks but finally edged past real estate - which had been the year's best sector over the prior eight weeks but which dropped back to second place with a10.36% cumulative return.

Building construction remained in third place, up 9.58%. Also showing strength were non-depository financial institutions (up 7.35%) and brokers and exchanges (up 7.34%).

No major sectors were actually in the red for the year to date this past week, but coal mining - the week's worst major-sized performer - was coming close to that red line, its return dwindling to just 0.17% from 1.58% the week before; the sector has been hurt by its five straight weeks among the worst finishers.

Others posting only relatively modest gains on a cumulative basis included food stores (up 3.42%), oil and gas exploration and production (up 3.46%), petroleum refining (up 3.60%), electric and gas services (up 3.69%) and machinery and computer manufacturing (up 3.71%).

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.