Advantage Data: Market down for second straight week as coal slide continues; health care robust

By Paul Deckelman

New York, July 13 – The junk bond market moved lower for a second straight week after two straight weeks before that during which it had edged narrowly higher, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News by Advantage Data Inc.

It was the market’s fourth such loss in the past six weeks.

Showing high yield’s recently streaky nature, the now-ended two-week advance had followed a two-week slump, which itself followed a three-week upturn – which had come after a two-week skid. That setback, in turn, had halted a six-week winning streak dating back to mid-March.

With 27 weeks now in the books so far this year, last week’s loss marked nine weekly retreats recorded this year, versus 18 weeks on the upside.

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 20 of those more sizable sectors closing in the red during the week ended Friday, with 10 sectors finishing in the black.

That was not much changed from the week before, ended July 3, when 22 sectors had posted losses and seven showed gains, with one other sector unchanged, showing neither a gain nor a loss.

Among specific sectors, the health care providers had the best weekly showing among those major groupings.

On the downside, coal mining remained in its customary position as the biggest loser among the largest sectors for a third consecutive week.

Not surprisingly, coal also stayed on as the worst year-to-date finisher among the big sectors for a 26th successive week, while the lodging sector remained on top year to date for a 19th week in a row.

Index extends retreat

For a second straight week, other statistical indicators of general junk market performance ended the week lower on Friday versus where they had finished out the previous Friday, after having been mixed for two consecutive weeks. Before that, they had been lower across the board for two more straight weeks and in three weeks out of the previous four, a slide interrupted only by the upturn all around during the week ended May 29, the most recent such weekly gain.

The Merrill Lynch High Yield Master II index thus lost ground last week for a third week in a row, after having finished higher during the week ended June 19; it has now been on the downside in five weeks out of the last six, and in six weeks out of the last eight.

The index fell by 0.379% on the week, after having been down 0.124% during the week ended July 3 and having declined by 0.248% the week before that, ended June 26.

The latest loss cut its year-to-date return to 2.385% as of Friday from 2.774% the previous Friday, when the index was published, despite the overall market close for Independence Day. Those levels, in turn, remained well below the 4.062% at which it had ended on May 29, its peak level for the year so far.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst had risen to 6.67% from 6.569% the Friday before. While it remained above the 5.843% seen on Feb. 27, its low for the year, the yield was still down from its 2015 peak of 6.86%, reached on Jan. 6, although it topped its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues widened to 508 basis points from the previous week’s 500 bps. It was wider than 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 550 bps seen on Jan. 5, the widest 2015 reading, as well as the 513 bps seen on the last day of 2014.

Coal deeper in the hole

Back on a sector-by-sector basis, Advantage Data meanwhile showed the coal mining sector on familiar ground for a third straight week, buried at the absolute bottom of the mineshaft after plunging 5.93% on the week, on top of losses of 3.91% the week before and a 3.53% loss the week before that, ended June 26.

Those three weeks have stood in contrast with the week ended June 19, when its 0.83% gain was the best among the large sectors – and that unusual show of strength had followed seven straight weeks during which it had been the absolute worst finisher, culminating with a 5.99% plunge for the week ended June 12.

The volatile sector thus went from worst to first in the week ended June 19, only to reverse during the week ended June 26 and travel from first back to worst.

It has now been the absolute worst finisher in 10 weeks out of the last 11 and in 11 weeks out of the last 13, as well as having been among the Bottom Five worst-performing large sectors for a given week – sometimes as the absolute worst, other times not – in 13 weeks out of the last 15, and in 16 weeks out of the prior 19.

Other sectors showing weakness included metals mining (down 4.56%), oil and natural gas exploration and production (down 2.24%), primary metals processing (down 0.84%) and wholesale durable goods distributors (down 0.46%).

It was the second consecutive week among the Bottom Five for the metals processors, the third straight week there for the metals miners and the fourth week in a row there for the energy E&P grouping, having each also been there during the July 3 week with losses of 0.29%, 1.28% and 0.87%, respectively.

Health care heads higher

Health care services providers had the best performance for the week of any of the significantly sized sectors, rising by 0.47%.

Other sectors showing relative strength in the latest week included food stores (up 0.42%), lodging (up 0.33%), food manufacturing (up 0.22%) and printing and publishing (up 0.21%).

None of those sectors had been among the top gainers the week before, nor had any been among the leading losers.

YTD: Lodging still tops

On a year-to-date basis, the lodging sector (up 17.82%) was the best cumulative performer for a 19th consecutive week.

The food stores grouping (up 8.42%) was in the runner-up spot for an eighth consecutive week and for a ninth week in the last 10.

The innkeepers and the grocers, as noted, were among the week’s better performers.

Holding companies and other investment offices (up 5.08%) were third-best on the year so far for a fifth week in a row.

Food manufacturing (up 4.27%) – also one of the week’s better performers, as noted – improved enough to move up to fourth-best on a year-to-date basis, despite not having been among the cumulative leaders the week before.

The food producers displaced petroleum refining (4.20%), which fell one notch in the rankings to just fifth-best on the year, after having been in the Number-Four slot for two straight weeks before that.

Coal stays in the cellar

On the downside, coal mining – clearly the week’s worst performer for yet another week, as noted – continued to do ever-worse on a year-to-date basis as well, showing a 2015 loss so far of 22.19%. It was coal’s 26th straight week at the bottom of the pile.

The metals mining sector – like coal one of the worst-performing sectors on the week, as noted – plummeted down to second-worse on the year with a cumulative loss of 1.78%, despite not having been among the biggest year-to-date losers the week before. It was the first time since the week ended May 1 that more than one sector was in the red for the year.

The securities and commodities brokers, dealers and exchanges sector (up 0.12%) was thus lifted to only third-worst on the year, after having been the second-worst major sector for three straight weeks before that, as well as for 10 weeks out of the previous 12.

Transportation equipment manufacturing (up 0.86%) was accordingly moved up to fourth-worst on the year from third-worst the previous week, a position that it had held for three straight weeks, for five weeks out of the previous six and in seven weeks out of the prior nine.

Oil and gas extraction (up 0.89%) – also one of the worst weekly losers, as noted – found itself dropped into the fifth-worst on the year slot last week, after not having been among the major-sectors underachievers the week before.

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