Advantage Data: Junk sectors lower across the board, post third straight decline

By Paul Deckelman

New York, Nov. 23 – The junk bond market’s negative mood continued last week – its third consecutive week on the downside, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

The sectors had turned narrowly lower the week ended Nov. 6 but were decidedly more negative during the week ended Nov. 13. They remained clearly negative during the week ended this past Friday, although the previous week’s overwhelmingly negative stance moderated a little, the data indicated.

The past three weeks of decline follow a four-week winning streak dating back to the week ended Oct. 9.

Prior to that most recent period of extended gains, Junkbondland, generally speaking, had been choppy and sloppy 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 and, during the week ended Sept. 18, one week which saw the sectors evenly split, with neither gains nor losses having the edge.

Over the last 10 weeks, going back to the week ended Sept. 18, more sectors have been worse in five of those weeks, more have been better in four of them and as noted, they were evenly split during the Sept. 18 week.

On a somewhat longer-term basis, with 46 weeks now in the books so far this year, 27 weekly advances have been recorded during that time, versus 18 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 62 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 21 of those more sizable sectors closing in the red during the week ended Friday, with 12 of those sectors finishing in the black.

That represented an improvement from the profoundly negative stance seen the week before, ended Nov. 13, which saw a clean sweep on the downside – all 33 of those more sizable sectors showed losses that week, with none recording any gains.

That represented a sharp deterioration from the more evenly split week ended Nov. 6, when 16 of those major sectors had ended in negative territory, 15 were on the positive side of the ledger and two other sectors had been unchanged on the week, showing neither a gain nor a loss.

During the sectors’ most recent positive week, ended Oct. 30, some 27 of those key sectors showed gains while six had losses.

Among the specific large-sized sectors, several energy-related groupings, such as coal mining and oil and natural gas-related sectors, were leading the way on the downside for a second consecutive week.

On the upside, chemical manufacturing and depository financial institutions were the top performers.

Coal mining remained by far the worst-performing big sector on a year-to-date basis, where it has been for the last 45 straight weeks, while lodging remained the top cumulative performer for a 38th week in a row.

Energy names struggle

Advantage Data showed energy-related large-sized sectors back in their familiar role of dominating the Bottom Five list of worst-performing sectors for a second consecutive week last week, after having made a rare visit to the upside two weeks earlier.

Chief among them was coal mining, which plunged 10.21% last week, on top of its 5.49% loss during the week ended Nov. 13 – in contrast to the week before, ended Nov. 6, when it had been among the Top Five best-performing major sectors the week before with a solid 1.08% gain. Coal, though, has now been among the Bottom Five sectors in five weeks out of the last six.

That was also the case for energy production and exploration (down 5.03%) and oil and gas extraction (down 3.87%). Those sectors had also been down 3.59% and 2.74%, respectively, during the Nov. 13 week.

Like coal, both of those volatile sectors had been on the Top Five list during the Nov. 6 week, with gains of 1.41% and 1.19%, respectively; energy E&P, in fact, was the single-best performer out of the 33 significantly sized sectors that week. Also like coal, both have now been among the Bottom Five in five weeks out of the last six.

Also among the latest week’s Bottom Five were paper manufacturing (down 2.80%) and metals mining (down 1.80%). Although they were not among the worst underperformers during the Nov. 13 week, the papermakers have now been among the Bottom Five finishers in two weeks out of the last three.

Chemical makers climb

On the upside, the chemical manufacturing sector (up 0.54%) turned in the best weekly performance of any of the significantly sized sectors.

Also showing strength were depository financial institutions (up 0.45%), lodging (up 0.29%), real estate (up 0.27%) and the automotive services and industrial and commercial machinery and computer manufacturing sectors, both of which gained 0.23% on the week.

It was the second straight week among the Top Five for real estate; the week before, during which, as noted, none of the sectors had finished in the black, real estate’s 0.22% loss was among the smallest in those major sectors.

None of last week’s other top gainers had been among either the Top Five or the Bottom Five the week before.

YTD: Lodging still on top

On a year-to-date basis, the lodging sector remained the best cumulative performer among the major sectors for a 38h straight week with a gain of 19.85% for the year so far.

The food stores grouping (up 7.49%) was in the runner-up spot for a 27th straight week.

Depository financial institutions (up 6.60%) were third-strongest for a fourth consecutive week and have now been in the Number-Three slot in five weeks out of the last six and over a little longer term, in seven weeks out of the last nine.

Securities and commodities brokers, dealers and exchanges (up 6.05%) moved up by one notch in the rankings, to fourth-best, after having been in the Number Five slot for two straight weeks.

They traded places with holding companies and other investment offices (up 5.99%), which previously had been fourth-best for two straight weeks.

The lodging and depository financial institutions were also among the week’s best finishers, as noted.

YTD: Coal still buried

On the downside, coal mining – the week’s worst-performing large-sized sector, as noted – continued to wallow at the bottom of the pile as the worst year-to-date performer as well, in that position for a 45th straight week with a 36.31% year-to-date loss.

The energy E&P sector was down 19.47% year to date, leaving it second-worst on the year for a seventh straight week.

Oil and gas extraction (down 16.22%) was third-worst on the year, also for a seventh straight week.

Metals mining (6.65%) deteriorated, losing one notch to go to fourth-worst on the year from fifth-worst previously.

The sector traded places with primary metals processing (down 5.66%), which improved, relatively speaking, to just fifth-worst on the year from fourth-worst before.

Metals mining has now been fourth-worst, and primary metals processing fifth-worst, in four weeks out of the last five.

All of those worst-lagging year-to-date sectors, except for primary metals processing, were also among the week’s worst finishers, as noted.

Indicators mixed

While the individual sectors remained on the downside last week – though with considerably less conviction than had been seen during the Nov. 13 week, according to the Advantage Data calculations, other statistical indicators of general junk market performance meanwhile turned mixed last week versus where they had been the previous Friday, after two straight weeks when they had been lower all around.

But the Merrill Lynch High Yield Master II index continued to struggle, posting its fourth consecutive losing week. It slid by 0.536%, although that was not as bad as the 1.40% swoon seen during the Nov. 3 week – one of its biggest weekly losses seen so far this year, eclipsed only by the 1.78% plunge recorded during the week ended Oct. 2.

For the year to date, gaining weeks still outnumber the decliners by a 25-to-21 margin.

The index’s year-to-date return figure moved further into the red, showing a cumulative loss of 2.148% on Friday – its first time with a loss bigger than 2.0% since Oct. 5, when it closed down 2.379%.

That year-to-date loss widened from 1.621% at the end of the previous week.

Its worst year-to-date loss figure has been the 3.069% of red ink recorded on Friday, Oct. 2, which was also the index’s biggest cumulative loss since Oct. 5, 2011, when it had showed a 3.834% deficit 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 had risen to 8.03% from 7.956% the Friday before. That was its first time above 8.0% since Oct. 5, when it was yielding 8.049%.

However, it remained below the 8.222% posted 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, 2015. The yield had ended 2014 at 6.448%.

Its spread to worst over comparable Treasury issues widened to 637 basis points from 629 bps the week before; those levels were still in from the year’s widest level of 685 bps on Oct. 2. However, 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 fell to 91.63708 on Friday from 92.2721 the week before, though it remained well up 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, 2015.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.