Advantage Data: Petroleum refining rallies as junk major sectors continue advance

By Paul Deckelman

New York, April 6 – The junk market was higher for a third straight week last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That recent upturn has followed a two-week slump in early March, which in turn had followed six consecutive weeks of gains before that.

Last week’s upturn was the 10th recorded so far this year, against three weeks on the downside.

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 27 of those more sizable sectors closing in the black during the week ended Friday, with only three sectors ending in the red.

That represented a continuation and a slight strengthening of the already healthy trend seen the week before, ended March 27, which had seen 25 of those larger sectors posting gains on the week, versus four sectors showing losses and one sector unchanged on the week, showing neither a gain nor a loss.

In the latest week, petroleum refining turned in the best performance of any of those large-sized sectors, while metals mining was the biggest loser.

On a year-to-date basis, lodging remained the best cumulative performer for a fifth straight week, while coal mining was the worst for a 12th week in a row.

Index adds to gains

Other statistical indicators of general market performance, meanwhile, were higher last week versus where they had finished out the previous week, for a second week in a row. That followed their having been mixed the week before that – which, in turn had followed two straight weeks when those indicators had all moved lower.

The upturn was led by the Merrill Lynch High Yield Master II index, which, like the overall junk market, posted its third straight weekly gain.

It rose by 0.317% on the week as of Thursday’s close, versus the previous week’s 0.279% advance. The index was not published this past Friday due to the market close in observance of Good Friday.

The index’s year-to-date return so far as of Thursday had risen to 2.626% from 2.377% at the end of the previous week. However, it remained below 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, Thursday’s yield to worst stood at 6.169%, up from 6.14% the previous Friday and up as well from 5.843% on Feb. 27, its low for the year. However, the yield was below its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues stood at 494 basis points, wider than the previous Friday’s 488 bps as well as the 451 bps recorded on March 2 and again on March 3, its tightest spreads for the year so far. But it was still in from the 513 bps reading seen on the last day of 2014.

Petroleum refiners pop

Back on a sector-by-sector basis, Advantage Data meanwhile showed petroleum refining posting the best performance by any of the significantly sized sectors, returning 1.02% on the week.

Other large-sized sectors showing strength this past week included lodging (up 0.86%), telecommunications (up 0.71%), miscellaneous retailing (up 0.65%) and non-computer electronics manufacturing (up 0.64%).

Metals mining moves lower

On the downside, metals mining posted the worst performance by any of the significantly sized sectors, plunging by 2.82% on the week. The miners had actually been among the best-performing sectors the week before, ended March 27, when they were up by 0.42%. However, the grouping has now been among the Bottom Five worst finishers for a third week out of the last four.

Other large-sized sectors showing losses last week included coal mining (down 1.15%) and oil and natural gas exploration and production (down 0.52%). The week’s Bottom Five list was filled out by a pair of sectors showing only feeble gains on the week – printing and publishing (up 0.01%) and precision instrument manufacturing (up 0.12%).

Like the metals miners, coal and the oil and gas sectors were reverting to their usual form this past week, after having made a rare trip to the Top Five list of best-performers during the March 27 week, when they had gained 0.91% and 0.42%, respectively.

But they have now both been among the Bottom Five underachievers in four weeks out of that last five.

Those three mining sectors – coal, oil and gas and metals – have been among the worst finishers in most of the 13 weeks seen since the start of the year.

YTD: Lodging stays on top

On a year-to-date basis, the lodging sector (up 9.37%) was the best cumulative performer for a fifth consecutive week.

Food stores (up 6.28%) were in the runner-up spot for a third straight week.

Petroleum refining (up 5.01%) , the week’s best performer among the major sectors, as noted, moved up by one notch in the year-to-date standings to third-best from fourth the previous week.

Depository financial institutions (up 4.12%) likewise moved up by one position, taking over fourth place after having been just fifth-strongest the week before.

Paper manufacturing (up 3.70%) moved up to that vacated fifth-place slot, despite having not been among the cumulative leaders the week before.

On the downside, coal mining remained the worst finisher year to date for a 12th straight week, with a 6.17% cumulative loss.

Metals mining (down 2.42%) tumbled to second-worst on the year, after having been just fourth-worst for two straight weeks.

Oil and natural gas E&P (down 0.51%) improved slightly, relatively speaking, to just third-worst on the year so far, after having been second-worst for two straight weeks before that.

Holding companies and other investment offices (up 0.48%) deteriorated to fourth-worst on the year, despite not having been among the worst laggards the week before.

Wholesale durable goods distributors moved up slightly, to just fifth-worst for the year so far, versus the previous week, when the sector had been the third-worst.

© 2015 Prospect News.
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