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

By Paul Deckelman

New York, Jan. 22 - The high-yield market saw its ninth consecutive week on the upside in the period ended Friday and its third straight gain of 2013 against no losses so far, according to sector-tabulated bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc. Last week was also the 10th week of gains in the last 13, and as has recently been the case, a sizable majority of the sectors posted advances.

Out of the 70 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 59 finished in the black last week and 11 sectors finished in the red.

While still decidedly positive, that represented a modest retreat from the pattern of overwhelming strength seen the previous week, ended Jan. 11, when 67 sectors showed gains and just two showed losses. (In the interim, Advantage Data recalculated and slightly expanded its roster of sectors, bringing the total number of sectors that it follows up to 70 this past week from 69 previously.)

That weakening seen in the overall market was also slightly 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; some 27 of those bigger sectors ended in the black last week, against three in the red, versus the previous two weeks, when all 30 sectors were on the upside, against none on the downside.

Among specific major sectors in the latest week, bonds of food stores and metals processing companies had the best gains. Wholesale durable goods distributors and real estate companies were the major losers.

Statistical indicators of general market performance showed gains for a ninth 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 0.227% as of the close Friday, following the previous week's 0.6% rise.

It was the ninth consecutive weekly gain, and the third 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 1.54% on Friday, up from 1.309% 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%, set on Dec. 20.

Among its other components, the index showed an average price of 105.593 on Friday, up from 105.504 the previous Friday and up as well from 104.352 on the final day of 2012. Its yield to worst stood at 5.678% versus the week-earlier yield of 5.747% and its year-end yield of 6.083%. Its spread to worst over comparable Treasury issues tightened to 484 basis points from 489 bps the week before and 523 bps at year-end.

Food stores keep firming

Back on a sector basis, Advantage Data meanwhile showed the bonds of food store operators having gained 0.59%, the most of any significantly sized sector. It was the second straight week at the top for the grocers, who had rung up a sizzling 1.42% the week before, largely powered by the gains that week 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.

Other notable gainers on week included metals processing (up 0.49%), non-depository credit institutions (up 0.44%) and the coal mining, health care and metals mining sectors, all of which rose by 0.35%.

It was the sixth consecutive week among the elite performers for the metals miners, who had been there the week before with a 1.16% return. It was third straight week there for the metals processors, which had made it the week before with a 0.88% gain. The non-depository institutions, on the other hand, had been among the previous week's worst performers with just a modest 0.26% advance.

On the downside, wholesale durable goods (down 0.23%) had the worst finish of any of the major sectors, followed by real estate (down 0.14%) and food manufacturing (down 0.03%).

It was the second straight week among the underachievers for real estate, which was there the previous week with just a 0.29% return. Rounding out the Bottom Five worst performers, automotive services crept up by 0.05% and miscellaneous retailing had a meager 0.09% return on the week.

Food stores lead for year

Three weeks into 2013, the food stores sector - which has led all of the significantly sized sectors in both of the last two weeks - was leading the key sectors on a year-to-date basis with a 3.75% cumulative return, having moved up from second place.

That pushed the previous week's leader, metals mining, down by one notch to second, with a 2.58% return so far. Depository financial institutions (up 2.20%) and lodging (up 2.12%) were in third and fourth place, respectively, having each moved up by one notch. Electronic equipment manufacturing was ahead by an even 2% on the year so far.

Among the laggards, real estate had the smallest year-to-date gain among the key sectors, at 0.60%, just barely behind wholesale durable goods distributors (up 0.61%). Electric and gas utilities had returned 0.78% so far, followed by non-depository credit institutions (up 0.86%) and chemical manufacturing (up 0.97).

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