Advantage Data: Food stores, metals lead key junk sectors as market rally continues

By Paul Deckelman

New York, Jan. 14 - The high-yield market saw its eighth consecutive week on the upside in the period ended Friday and the second straight gain of 2013 against no losses so far, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Last week was also the ninth week of gains in the last 12, and as has recently been the case, an overwhelming majority of the sectors posted advances.

Out of the 69 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 67 finished in the black last week and only two sectors finished in the red.

That extended the pattern of strength seen the previous week, ended Jan. 4, when 67 sectors showed gains and just one showed a loss. (In the interim, Advantage Data recalculated and slightly expanded its roster of sectors, bringing the total number of sectors that it follows up to 69 this past week from 68 previously.)

That continuing advance seen in the overall market was also reflected in 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; for a second consecutive week, all 30 of those bigger sectors ended in the black last week, with none in the red.

Among specific major sectors in the latest week, bonds of food stores and metal mining companies had the best gains. No significantly sized sectors finished in the red, though amusement and transportation equipment manufacturing companies led the list of sectors showing only relatively small gains.

Statistical indicators of general market performance showed gains for an eighth straight week, including the total year-to-date return as measured by the widely followed Merrill Lynch High Yield Master II index.

Index gains continue

The Merrill index showed junk bonds with a one-week gain of 0.6% as of the close Friday, following the previous week's 0.718% rise.

It was the eighth consecutive weekly gain, and the second of 2013 against no weekly losses. The index finished 2012 with 40 weekly gains versus 12 weekly losses.

The index's year-to-date return stood at 1.309% on Friday, up from 0.704% the week before. It had finished 2012 with a cumulative return of 15.583%, just a little below the peak for the year of 15.589%, which had been set on Dec. 20.

Among its other components, the index showed an average price of 105.504 on Friday, up from 105.041 the previous Friday and up as well from 104.352 on the final day of 2012. Its yield to worst stood at 5.747%, versus the week-earlier yield of 5.891% and its year-end yield of 6.083%. Its spread to worst over comparable Treasury issues tightened to 489 basis points from 497 bps the week before and 523 bps at year-end.

Food stores firm up

Back on a sector basis, Advantage Data meanwhile showed the bonds of food store operators having zoomed by 1.42% last week, the most of any significantly sized sector, largely powered by the gains rung up in SuperValu Inc.'s paper on the news that the troubled Eden Prairie, Minn.-based supermarket company had agreed to sell five of its chains to a Cerberus Capital Management-led consortium, which will assume a big chunk of SuperValu's existing debt. Ironically, the food stores sector had been among the weaker finishers the week before, with a 0.32% return.

Other notable gainers on week included metals mining (up 1.16%), depository financial institutions (up 1.04%), precision instrument manufacturing (up 0.94%) and the electronic equipment manufacturing and metals processing sectors, which were each up 0.88%.

It was the fifth straight week among the elite performers for the metals miners, who had been there the week before with a 0.90% return. It was the second straight week among the best performers for the depository financials and the metals processors, each of which had been there the previous week with gains of 0.72% and 0.70%, respectively.

With all of the significantly sized sectors showing gains in the latest week, there was no downside as such. However, amusement and recreation companies (up 0.20%), transportation equipment manufacturers (up 0.21%), publishers (up 0.25%), non-depository credit institutions (up 0.26%) and real estate companies (up 0.29%) posted smaller gains than the other key sectors. It was the second straight week there for the non-depository financials, which were there the week before with a meager 0.09% return.

Metals mining leads for year

Two weeks into 2013, the metals mining sector - which posted strong returns in both of those weeks - was leading the key sectors on a year-to-date basis with a 2.21% cumulative return, having moved up from second place in the first week of the year. It was followed by food stores (up 1.96%), which were propelled by the sector's big weekly gain, coal mining (up 1.60%), which had been the leader the previous week, depository financial institutions (up 1.59%) and lodging (up 1.56%), which had also been among the year-to-date leaders the week before.

Among the underachievers, non-depository credit institutions had the smallest year-to-date gain among the key sectors, at 0.35% followed by electric and gas utilities (up 0.64%); both had been among the smallest year-to-date gainers the week before. They were joined near the bottom by real estate (up 0.68%), machinery and computer equipment makers (up 0.75%) and amusement providers (up 0.76%).

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