Advantage Data: Utilities, insurers lead as major junk sectors keep strengthening

By Paul Deckelman

New York, April 8 - The high-yield market posted its eighth successive week of gains in the period ended Friday, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Those gains have been seen since the week ended Feb. 15, when junk had broken out of a two-week slump.

The latest results marked junk's 12th weekly gain so far in 2013, against just those two weekly losses, which occurred back-to-back in the weeks ended Feb. 1 and Feb. 8. On a longer-term basis, last week marked the 19th gain in the last 24 weeks, against five losses during that timeframe.

Besides the current streak, a stretch of 10 consecutive weekly gains between last November and the week ended Jan. 25 also accounted for much of those gains.

Out of the 65 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 60 finished in the black last week, with five sectors ending in the red.

That represented a continuation and a strengthening of the robust pattern seen the previous week, ended March 28; in that prior holiday-shortened week, 57 sectors showed gains and eight posted losses.

The continued strengthening trend since the early February weakness in the overall market was reflected 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. Some 29 of those bigger sectors showed gains on the week, versus only one loss; the week before, 27 of those sectors were winners, against just three losers.

Among specific major sectors in the latest week, bonds of electric and gas utility companies and insurance carriers had the best showings. Bonds of metals mining companies posted a loss.

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

Index extends gains

The Merrill index showed junk bonds with a one-week gain of 0.158% as of the close Friday, extending the previous week's 0.10% advance. The index, which has now seen 12 gains so far in 2013 against two losses, finished 2012 with 40 weekly gains versus 12 weekly losses.

The index's year-to-date return stood at 3.014%, up from 2.851% at the end of the previous week. Friday's return was a little below the peak level for 2013 of 2.064%, which was recorded this past Thursday. The index 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.

However, among its other components, the index showed an average price of 105.1939 on Friday, off a little from 105.3186% a week earlier. Its yield to worst stood at 5.684%, having risen from the week-earlier yield of 5.626%. Its spread to worst over comparable Treasury issues widened to 496 basis points from 484 bps the week before.

Utilities get turned on

Back on a sector basis, Advantage Data meanwhile showed the bonds of electric and gas utilities having had the best showing on the week among the significantly sized sectors, with gain of 0.49%.

Also showing strength in the latest week were insurance carriers (up 0.48%), financial brokers and exchanges (up 0.45%), wholesale durable goods distributors (up 0.41%) and financial holding companies and investment offices (up 0.40%).

It was the second straight week in the Top Five for the insurers and the durable goods distributors, which also made it the previous week, both with returns of 0.23% at that time. The brokers and exchanges, in contrast, had been among the worst performers the prior week, when the sector lost 0.08%.

On the downside, only metals mining concerns actually showed a loss in the latest week, dipping 0.12%. It was the sector's fourth consecutive week among the worst finishers, having been there the previous week with a 0.22% loss, and its third straight week right at the bottom of the pile.

The Bottom Five was rounded out in the latest week by anemic performances from telecommunications (up 0.06%), publishing and printing (up 0.09%), machinery and computer manufacturing (up 0.10%) and non-computer electronic equipment manufacturing (up 0.11%). The week before, the publishers had actually led all of the significant sectors with a 0.44% return.

Food stores lead for year

Fourteen weeks into 2013, the food stores sector remained the leader among the key sectors on a year-to-date basis for a 12th straight week, posting a cumulative return of 11.94%. Lodging (up 4.80%) was second-best for a third straight week. They were followed by publishing and printing (up 4.36%), precision instrument manufacturing (up 4.34%) and coal mining (up 4.13%).

Among the year-to-date underachievers was telecommunications (up 1.99%), which was at the bottom for a fourth consecutive week. That sector was joined by wholesale durable goods distributors (up 2.20%), transportation equipment manufacturers (up 2.24%) and the chemical manufacturing and real estate sectors (both up 2.54% on the year so far).

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