Advantage Data: Junk sectors advance; amusements, food, petroleum lead

By Paul Deckelman

New York, Oct. 26 – The junk bond market was solidly positive for a third straight week, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Last week’s strength, and the surge seen during the weeks ended Oct. 9 and Oct. 16, followed on the heels of a two-week slump during the weeks ended Sept. 25 and Oct. 2.

Those downside weeks had followed one week during which the sectors had been evenly split between gainers and losers and three consecutive weeks before that during which more sectors had advanced than retreated.

Generally speaking, Junkbondland has been choppy ever since the end of a long winning streak in early May, with the market after that experiencing periods of several weeks of gains alternating with a couple of weeks of losses.

Over the last 10 weeks, going back to the week ended Aug. 21, more sectors have been better in six of those weeks, more have been worse in three of them and, as noted, they were evenly split in one week, ended Sept. 18.

On a somewhat longer-term basis, with 42 weeks now in the books so far this year, 26 weekly advances have been recorded during that time, versus 15 weeks on the downside and the aforementioned one evenly split week.

A subset of the 33 most significantly-sized sectors (out of the total of 61 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, against six that ended in the red.

That was a slight pullback from the performance seen during the week ended Oct. 16, when 29 of those larger sizable sectors posted gains just four were showing a loss.

The week before that, ended Oct. 9, was a clean sweep, with all 33 of those larger sizable sectors ending in positive territory and not a single one on the negative side of the fence.

That was almost a mirror opposite of the week ended Oct. 2, when just a single bigger sector had ended in the black and all of the rest were in the red.

Among the specific sectors, amusement and recreation services, food manufacturing and petroleum refining were all leading the larger-sized sectors in terms of gains on the week.

Coal mining, meanwhile, was in its usual position down at the bottom of the pile for a second straight week, after having shown rare strength the week before, when it had ended among the better finishers.

Not surprisingly, coal also remained the single worst performer on a year-to-date basis for a 41st consecutive week, while lodging had the best cumulative return of any major sector for a 34th straight time.

Indicators, index extend gains

For a third week in a row and for the fourth week in the last seven and the seventh week out of the last nine, other statistical indicators of general junk market performance mirrored the upturn seen in the sectors, posting week-over-week gains across the board versus where they had been the previous Friday. Those three strong weeks broke a losing streak of three straight weeks before that.

Among the market measures doing better for a third successive week was the Merrill Lynch High Yield Master II Index; as was the case with the other indicators, the last three strong weeks also broke out of its recent three-week skid.

It rose by 0.602% last week, on top of the 0.068% gain for the week ended Oct. 16, which, in turn had followed a 2.702% jump the week before, ended Oct. 9 – its biggest weekly advance for 2015, also representing one of the biggest weekly gains ever recorded.

That great leap for the volatile index had followed its 1.78% plunge in the week ended Oct. 2 – its second straight new mark for the largest weekly loss for the year so far, topping the 1.445% weekly loss during the week ended Sept. 25.

The index has now been up in five weeks out of the last six and in six weeks out of the last 10. For the year-to-date, gaining weeks outnumber the decliners by a 25-to-17 margin.

The latest week’s gain put its year-to-date return back in the black, at 0.281% for the first time in more than a month, ending the week in positive territory for the first time since the week ended Sept. 18, when it closed 0.135% higher.

It was up from a year-to-date deficit of 0.382% in the week ended Oct. 16, although that had been considerably improved from the 3.069% year-to-date loss posted on Friday, Oct. 2 – its worst cumulative loss for the year as well as the index’s biggest cumulative loss since Oct. 5, 2011, when it had showed a 3.834% loss for the year.

Its peak gain for this year, meanwhile, was the 4.062% at which it had ended on May 29.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst declined to 7.429% from 7.573% the Friday before and from 8.222% on Oct. 2 – the highest yield seen so far this year. Its low point for the year so far has been 5.843%, seen on Feb. 27. The yield had ended 2014 at 6.448%.

Its spread to worst over comparable Treasury issues narrowed to 604 basis points from 623 bps the week before, although that level was still well in from its year’s widest level of 685 bps on Oct. 2. Those levels all compare unfavorably with the spread to worst on the last day of 2014 of 513 bps, as well as its tightest point this year of 451 bps on March 2 and again on March 3.

And its average price of the bonds tracked by the index rose to 94.4434 from 93.99739 the week before and from its 2015 low of 91.67313 on Oct. 2. It had ended 2014 at 98.8747, while its high for this year was 101.3272, set on Feb. 27.

Amusement, food, refining lead

Back on a sector-by-sector basis, Advantage Data meanwhile showed a trio of sectors having the biggest gain among the large-sized groupings last week, as amusement and recreation services, food manufacturing and petroleum refining each were up by 1.03% on the week.

Insurance carriers and non-depository credit institutions rounded out the latest week’s Top Five list of the best-performing large-sized sectors, each with a 0.89% gain on the week.

None of last week’s large-sized leaders had been among either the best-performing sectors or the worst-performing groupings the week before.

Coal still in the hole

On the downside, coal mining lost 4.64% on the week, the worst of any large-sized sector. It was the second straight week that coal was the biggest loser, having also had that dubious honor the week before that with a 1.63% loss – which represented a return to form for the coal miners, who had showed a rare sizable gain of 4.13% the week before that, ended Oct. 9.

Before that surge, coal had been among the Bottom Five worst-performing sizable sectors for three straight weeks and has thus now been there in five weeks out of the last six.

Longer-term, coal has now been among the Bottom Five in 25 weeks out of the last 30 and in 28 weeks out of the last 33.

It has been the absolute worst-performing large sector in eight weeks out of the last 12 and in 21 weeks out of the last 26.

Also posting losses last week were chemical manufacturing (down 1.68%), energy exploration and production (down 1.12%), healthcare (down 0.70%) and oil and natural gas extraction (down 0.68%).

It was the second straight week among the Bottom Five sectors for the energy exploration and production, healthcare and oil and gas extraction sectors, each of which had also been among the underachievers the previous week with losses of 0.13%, 0.10% and 0.09%, respectively. Oil and gas extraction has now been in the Bottom Five in five weeks out of the last six.

YTD: Lodging still on top

On a year-to-date basis, the lodging sector remained booked into the penthouse suite as the best cumulative performer among the major sectors for a 34th straight week with a gain of 18.55% for the year so far.

The food stores grouping (up 8.65%) was in the runner-up spot for a 23rd straight week and for a 24th week in the last 25.

Real estate moved up to third best on the year with a 7.27% cumulative gain last week, despite having not been among the leaders the week before. However, it has now been the third strongest in two weeks out of the last three.

Real estate replaced depository financial institutions (up 6.32%), which fell by one notch in the standings to just fourth best on the year from third the week before, where it had been for three weeks out of the prior four.

Securities and commodities brokers, dealers and exchanges (up 5.91%) were fifth best on the year for a second week in a row, and in three weeks out of the last four.

For a second straight week, none of last week’s best finishers were also among the year-to-date leaders.

YTD: Coal still buried

On the downside, coal mining – the week’s single-worst finisher, as noted – continued to wallow at the bottom of the pile as the worst year-to-date performer for a 41st straight week, showing a 35.43% year-to-date loss.

The energy E&P sector (down 15.17%) was second worst on the year for a third straight week.

Oil and gas extraction (down 11.81%) was third worst on the year, also for a third straight week.

Metals mining (down 7.04%) fell by one position in the rankings to fourth worst on the year, after having been just fifth worst for the two previous weeks.

Primary metals procession (down 3.57%) weakened to fifth worst on the year, despite not having been among the worst cumulative finishers the week before.

Besides coal, energy exploration and production and oil and gas extraction were also among the week’s worst finishers, as noted.

© 2015 Prospect News.
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