Advantage Data: Junk major-sector rally rolls on; coal mining best; real estate worst

By Paul Deckelman

New York, March 3 - The high-yield market posted gains for a fourth consecutive week, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc. During the week ended Friday, junk continued to shake off the rare loss seen some weeks earlier, in the week ended Jan. 31.

That prior downturn had not only been its first weekly loss for 2014 but had also snapped a winning streak before that of four consecutive weeks since the beginning of the year and 11 straight weeks of gains dating back to early November of 2013. Since the beginning of this year, gains have now been seen in eight weeks, versus the one downturn.

In the latest week, all 58 of the broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black, with none ending in the red. That improved on the breakdown seen the week before, ended Feb. 21, when 55 sectors out of the 58 tracked posted gains, with three other sectors showing losses.

The same strength was 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 latest week, all 30 of those sectors closed in the black for a second consecutive week, with none in the red.

In the latest week, coal mining was the best performer among the significantly sized sectors for a second consecutive week, while real estate was the worst.

Printing and publishing remained the best performer among the major sectors so far on the year. Real estate was also the worst year-to-date performer.

Index rise continues

Statistical indicators of general market performance meanwhile were higher across the board last week versus the previous Friday, after having been mixed the week before that.

Among those indicators was the widely followed Merrill Lynch High Yield Master II index, which posted its fourth consecutive weekly gain after two straight weekly losses, rising by 0.675%. That followed a 0.52% rise in the week ended Feb. 21.

Those gains, and the ones recorded earlier in February, stood in contrast to the 0.032% downturn seen in the week ended Jan. 31 and a 0.283% retreat recorded in the week ended Jan. 24, which in turn had snapped a streak of 10 consecutive Fridays during which the index had finished higher than the previous Friday, dating back to the week ended Nov. 15, 2013.

The index has now seen seven weekly gains in 2014, against that pair of losses. In 2013, the index showed 33 weekly gains against 19 losses, versus 2012, when it notched 40 gains and 12 losses.

As of Friday, the index's year-to-date return had firmed to 2.759% - its 14th consecutive new high point for 2014 so far. It was up from 2.07% the previous Friday.

In 2013, the index had ended at 7.419%, its high point for the year, although that was well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 104.915794 on Friday, up from 104.4211 the week before. Friday's level was its highest point for the year so far, in contrast with its low for the year so far of 103.24599, set on Feb. 4. It was also up from 103.3161, where it had ended 2013.

Its yield to worst stood at 5.215%, down from 5.329% the previous Friday, although it was up from Thursday's level of 5.191%, its lowest level for the year so far. Friday's level was also well down from its high for the year of 5.735%, set on Feb. 4, and down as well from 5.671% at the end of 2013.

The index's spread to worst over comparable Treasury issues stood at 397 basis points on Friday - its tightest level of the year, first reached during Thursday's session. It was in from 404 bps the previous Friday and much tighter still than its wide point for the year so far, 444 bps, set on Feb. 4. The spread had been 418 bps on the last day of 2013.

Coal comeback continues

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of coal-mining companies (up 1.42%) with the best performance among any of the significantly sized sectors for a second straight week. Coal had also been in the top spot during the week ended Feb. 21, with a 0.80% gain.

Those two solid rises contrasted sharply with the weakness the sector had shown over a period of weeks earlier in the year, including having been the absolute worst-performing sector in several of those weeks.

Also showing strength in the latest week were printing and publishing (up 1.19%), securities and commodities brokers, dealers and exchanges (up 0.91%), telecommunications (up 0.89%) and non-depository credit institutions (up 0.80%).

It was the third straight week that the telecom grouping was among the Top Five list of best-performing sectors, having also been there the week before with a 0.55% gain, and the week before that, ended Feb. 14, when it advanced by 0.67%.

With all of the sectors, significantly sized or otherwise, having finished in the black this past week, as noted, there was no downside as such. The Bottom Five list of the weakest finishers was therefore filled for a second consecutive week with sectors whose returns were only considerably smaller than those of their peers.

These included real estate (up just 0.04%), wholesale durable goods distributors (up 0.16%), lodging (up 0.23%), financial holding companies and other investment offices (up 0.32%) and petroleum refining (up 0.51%).

It was lodging's second straight week among the worst finishers, having also been there the week before with a meager 0.08% return.

Printers stay strong on year

With nine weeks in the books for 2014 so far, printing and publishing (up 6.47%) was the best year-to-date performer among the significantly sized sectors for a fifth week in a row, helped by its Top Five performance among the weekly gainers, as noted.

Paper manufacturing (up 4.77%) moved up by two positions in the standings to the runner-up slot, after having been just fourth-best the week before. But the papermakers had been second-best for three straight weeks before tumbling to fourth, and have thus now been second-strongest in four weeks out of the past five.

Petroleum refining (up 4.05%) dropped by one notch to third-best from second-place the previous week.

That also pushed health care (up 3.76%) down by one position, to fourth-place, after having been the third-best-performing sectors for two straight weeks before that.

Telecommunications - like the printers also among the week's best performers - stayed in the fifth-best slot for a third straight week with a 3.52% year-to-date return.

Among the underachievers, real estate - the week's worst finisher among the key sectors, as noted - also fell by three positions to the bottom on a year-to-date basis, from just fourth-worst the previous week, with a 1.23% cumulative return.

Holding companies and other investment offices (up 1.46%) were second-worst on the year, although the sector had not been among the worst laggards the week before.

Metals mining (up 1.60%) dropped to third-worst from fifth-worst the week before, but coal mining (up 1.72%), enjoying a second consecutive week as the best-performing significantly sized sector, as noted, used that positive weekly momentum pull itself out of the year-to-date cellar, improving to just fourth-worst for the year after having been the worst sector over the four weeks before that.

Miscellaneous retailing (up 1.80%) likewise improved, relatively speaking, moving up to just fifth-worst for the year from second-worst the week before.

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