Advantage Data: Lodging, refining tops as re-started junk major-sector rally continues

By Paul Deckelman

New York, Nov. 25 - The high-yield market continued its winning ways during the week ended Friday as it posted its second consecutive weekly gain, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

In the previous week, ended Nov. 15, it had re-ignited a rally that had been interrupted the week before, ended Nov. 8, when it had seen a rare loss that had snapped a winning streak of five consecutive weeks on the upside before that and nine weeks out of the previous 10.

The latest weekly advance now runs that positive trend to seven weeks out of the last eight and 11 weeks out of the last 13.

It was the 32nd weekly improvement that the junk market has seen so far this year, versus 15 weekly setbacks.

In the latest week, 57 out of the 60 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black, with just three sectors ending in the red.

That represented a definite strengthening from the week before, when 44 of those sectors had recorded gains and 17 had suffered losses. In the interim, Advantage Data recalculated and slightly trimmed its sector roster.

That strengthening was also seen in the behavior 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 outstanding. In the week ended Friday, 29 out of the 30 were finishing in positive territory, with only one showing negative results, in contrast to the previous week, when 19 of those sectors had ended in the black and 11 had finished in the red.

Among specific major sectors in the latest week, bonds of lodging providers and petroleum refining companies turned in the best showings, while non-depository credit institutions had the sole loss on the week.

Index shows improvement

Statistical indicators of general market performance were meanwhile higher versus the previous week for the first time after having been mixed for the previous four straight weeks.

The total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, posted its second consecutive weekly gain. Those two advances had followed a loss in the week ended Nov. 8, which, in turn, had come after the index had racked up five straight weeks of gains before that.

At the close on Friday, the index showed junk bonds having risen by 0.271% on the week, on top of the previous week's improvement of 0.126%.

The index has now seen 28 weekly gains so far in 2013 against 19 losses. It had finished 2012 with 40 weekly gains versus 12 losses.

As of Friday, the index's year-to-date return had firmed to 6.433%, up from 6.146% the prior Friday. It was also a new peak level for 2013, surpassing the 6.428% reading recorded this past Wednesday.

Those levels remained well above the index's 2013 low point of 0.384%, recorded on June 25.

Among its other components, the index showed an average price of 103.2926 on Friday, up from 103.151337 a week earlier. Those levels meanwhile remain well under the highest average price for the year of 107.222488, set on May 9.

Its yield to worst stood at 5.67%, down from 5.74% a week earlier. While having come in markedly from its high point for the year of 6.853%, set on June 25, it still remained well above its low yield for the year of 4.986% on May 9 - which was also the lowest all-time yield as well.

The index's spread to worst over comparable Treasury issues stood at 441 basis points, in from 448 bps the week before. While recently trending lower, the spread continued to steer a course in between its 2013 wide point of the year of 536 bps, set June 25, and its tightest level for the year so far of 427 bps over Treasuries, set on May 9.

Lodging leads the way

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of lodging providers as the best performer among the significantly sized groupings, with a 0.51% gain on the week.

Also showing strength in the latest week were petroleum refining (up 0.37%) and the amusement and recreation sector, building construction and primary metals processing, all of which gained 0.34% on the week.

Metals processing was the only one of any of those sectors that had also been among the Top Five best-performers during the previous week, when it had gained 0.16%.

On the other hand, both construction and amusements had been among the weakest sectors the previous week, when construction, spending is second straight week among the worst laggards, had lost 0.10%, while amusement had been one of the two biggest losers that week with a 0.17% deficit.

On the downside, only non-depository credit institutions actually ended with a loss among the most significantly sized sectors, easing by 0.03%.

The latest week's Bottom Five list of the worst large-sector performers was rounded out this week by anemic results from the financial brokers, dealers and exchanges sector (up 0.03%), along with coal mining (up 0.10%), food manufacturing (up 0.12%) and insurance carriers (up 0.13%).

It was the second straight week among the underachievers for the brokers and dealers grouping, which had lost 0.15% the week before, and for coal mining, which had lost 0.17% in the prior week, putting it in a tie with the amusements sector, as noted, for the worst performer that week.

Coal had actually accomplished the relatively unusual feat in that previous week of falling from first to worst, since it had been the single top performer among the major sectors the week before that, ended Nov. 8, when it had racked up a robust 1.01% advance.

Food stores ahead for year

Forty-seven weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 45th straight week, posting a cumulative return of 15.16%. It remained the first, and so far the only major sector to hit double digits on a percentage basis this year, although several other sectors have come close to also breaking that barrier.

One of those is lodging (up 9.46% on the year), which was in the runner-up position for a second consecutive week.

Among the other year-to-date leaders were precision instrument manufacturing, third-best with a 9.10% cumulative return, and fourth-best printing and publishing with a return of 8.60%; neither sector had been among the year-to-date leaders the week before.

Financial brokers, dealers and exchanges was fifth-strongest for a third straight week, with a return of 8.53%.

On the downside, coal mining (up 4.40% on the year) returned to its familiar status as weakest-performing major sector for the year to date, after having been just third-worst the week before and fourth-worst the week before that. Before improving to fourth-worst, relatively speaking, coal had spent 21 straight weeks as the absolute worst-performing significantly sized sector, including a six-week stretch in that time during which it had actually been showing red ink for the year rather than just relatively small cumulative gains.

Electric and gas utilities (up 4.46%) meanwhile stayed right down near the bottom as second-worst on the year for a 17th consecutive week.

Building construction, which had fallen to the bottom the week before, improved two notches to just third-worst on the year with a 4.89% return.

Machinery and computer manufacturing fell to fourth-worst on the year with a 5.27% reading, despite having not been among the worst year-to-date performers the week before.

Food manufacturing improved slightly, relatively speaking, to just fifth-worst on the year with a 5.34% return, after having been fourth-worst the week before.

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