Advantage Data: Lodging in the lead as junk major sectors break two-week losing streak

By Paul Deckelman

New York, March 23 – The junk market edged higher last week, breaking a two-week losing streak, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Those two down weeks, in turn, had followed six consecutive weeks of gains before that.

Last week’s upturn was the eighth recorded so far this year, against three weeks on the downside.

It was not a terribly convincing rally, with almost as many sectors seen lower on the week as finished higher.

A subset of the 30 most significantly sized sectors (out of the total of 58 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe), as measured by the number of bond issuers, the collective number of issues tracked and their total face amount outstanding, showed 16 of those more sizable sectors closing in the black during the week ended Friday, with 14 sectors ending in the red.

Still, that represented a turnaround from the previous week, ended March 13, which had seen 23 of those larger sectors posting losses on the week, versus just seven sectors recording gains.

In the latest week, the leaders, both positive and negative, remained the same as the previous week, with lodging as the week’s best major-sector finisher for a second straight week and the leading year-to-date performer as well, for a third week in succession.

On the downside, coal did the worst among the large-sized sectors for a second consecutive week and remained all the way down at the bottom of the mineshaft on a year-to-date basis for a 10th week in a row.

Index turns upward

Other statistical indicators of general market performance, meanwhile, were mixed last week versus where they had finished out the previous week, after having been lower across the board for the prior two weeks and better all-around for four consecutive weeks before that.

The upturn was led by the Merrill Lynch High Yield Master II index, which, like the overall junk market, turned higher to break a two-week skid.

It rose by 0.045% on the week as of Friday’s close, versus the previous week’s 0.551% retreat.

It was eighth weekly gain of the year so far against three weekly losses.

The index’s year-to-date return so far as of Friday had risen to 2.091% from 2.046% at the end of the previous week. However, it remained down by more than one full percentage point from its peak level for the year so far of 3.125%, set on March 2.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 6.208%, down from 6.219% the previous Friday, though it remained up from 5.843% on Feb. 27, its low for the year. However, the yield was below its 2014 year-end 6.448% level.

The index’s spread to worst over comparable Treasury issues stood at 493 basis points, wider than the previous Friday’s 480 bps as well as the 451 bps recorded on March 2 and again on March 3, its tightest spread for the year so far. But it was still in from the 513 bps reading seen on the last day of 2014.

Lodging in the lead

Back on a sector-by-sector basis, Advantage Data meanwhile showed lodging posting the best performance by any of the significantly sized sectors for a second consecutive week, returning 0.79%, on top of the previous week’s 1.03% rise.

Other large-sized sectors showing strength this past week included depository financial institutions (up 0.57%), the food stores and miscellaneous retailing sectors, both of which gained 0.36% and paper manufacturing (up 0.31%).

It was the second straight week among the Top Five best weekly performers for the grocers and the depository financials, which had each been there the week before with returns of 0.29% and 0.05%, respectively.

Coal again cellar-dweller

On the downside, coal mining posted the worst performance by any of the significantly sized sectors for a third consecutive week, plunging by 2.84%, on top of the previous week’s 3.22% nosedive and a 1.83% retreat the week before that.

The three straight weeks of losses for coal represented a continued deterioration from the unusual strength it had shown over four straight weeks before that, between the week ended Feb. 6 and the week ended Feb. 27, when perennial cellar-dweller coal, atypically, had actually been among the week’s best performers in each of those weeks, including three straight weeks in which the volatile sector had been the single-best major sector performer.

But those four weeks of strong gains were the exception rather than the rule; coal’s more recent swoon marked a return to the long-standing pattern of weakness that had seen coal among the worst performers for 11 straight weeks before the upturn, dating back to late November and including three straight weeks (ended Jan. 16, Jan. 23 and Jan. 30) when coal had been the single worst-performing major-sized sector. It had also been the worst-performing large sector at year-end in both 2013 and 2014.

Other sectors showing notable losses last week included oil and natural gas exploration and production (down 1.75%), metals mining (down 1.44%), petroleum refining (down 0.38%) and holding companies and other investment offices (down 0.24%).

It was the second consecutive week among the Bottom Five for the metals miners and the third straight week there for oil and gas companies, which had also had that dubious honor the week before with losses of 1.45% and 2.16%, respectively.

YTD: Lodging stays on top

On a year-to-date basis, with 11 weeks in the books, the lodging sector (up 6.08%) was the best cumulative performer for a third consecutive week; during the week ended March 6, the inn-keepers had reclaimed the top spot in the standings, which they had held for three straight weeks in January, only to surrender that lofty perch to the food stores sector and then play second fiddle to the grocers for the next four weeks after that.

The food stores (up 5.59%), looking to make a comeback after having been so ignominiously deposed from the top spot, moved up by one position in the standings to the runner-up spot in the latest week, from just third-best the week before and only fifth-best the week before that.

Electric and gas utilities (up 3.56%) improved to third-best so far this year last week, after having been fourth-best for two straight weeks before that.

Depository financial institutions (up 3.53%) were fourth-best, despite having not been among the year-to-date leaders the week before.

Petroleum refining (up 3.49%) tumbled to just fifth-best last week, after having been second-best for two straight weeks before that.

On the downside, coal mining’s recent return to its more customary role as worst weekly performer after an atypically strong four weeks before that has cemented its position so far as worst finisher year to date. Last week was its 10th straight week at the bottom of the pile, with a 5.42% cumulative loss.

Oil and natural gas E&P (down 0.89%) – along with coal one of the week’s worst-performing sectors, as noted – fell to second-worst on the year from fourth-worst the previous week.

Holding companies and other investment offices (down 0.23%) tumbled to third-worst on the year so far, after having not been among the worst cumulative performers the week before.

That was also the case for metals mining (up 0.50%), the fourth-worst year-to-date sector despite not having been among the worst laggards the week before. However, it was among the worst weekly performers last week, as noted, dragging down its year-to-date standing.

Transportation equipment manufacturing (up 0.67%) improved, relatively speaking, to just fifth-worst on the year so far, after having been the second-worst the previous week for a second week out of the prior three.

© 2015 Prospect News.
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