Advantage Data: Junk sectors rebound after two straight weeks under pressure

By Paul Deckelman

New York, Feb. 22 – The junk bond market moved back into positive territory last week after two straight weeks before that mired deeply in the red, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

However, it was only the second week out of seven so far this year in which more sectors were posting gains than losses.

Besides last week’s upturn, the sectors had done better during the week ended Jan. 29, after having started the new year with three straight weeks on the downside and six weeks out of the prior seven showing losses.

On a slightly longer-term basis, last week was the third week of the last 10, dating back to Dec. 18, in which more sectors were posting losses rather than gains.

Besides the Jan. 29 week, the only other positive week during that long stretch was the holiday-shortened week ended Dec. 31.

Junkbondland, generally speaking, had been choppy ever since the end of a long upward surge in early May of last year; after that, the market mostly experienced periods of several weeks of gains alternating with a couple of weeks of losses, although the market has turned decidedly more negative in recent weeks, as indicated.

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 a nearly clean sweep on the upside, with 32 out of 33 having finished in the black during the week ended Friday with just a single sector closing in the red.

That was a nearly complete reversal of the breakdown seen the week before, ended Feb. 12, when all 33 of the large-sized sectors had posted losses, against no gains.

Among the specific large-sized sectors, midstream energy had the best gain on the week, while coal mining suffered the worst loss.

That loss dropped coal to the very bottom of the year-to-date rankings while miscellaneous retailing was on top for a fifth week in a row.

Midstream energy top sector

Among specific large-sized sectors, midstream energy services had the best return of any large-sized sector on the week, jumping by 4.81%.

That broke a two-week skid during which the sector had been among the biggest losers, with downturns of 4.04% seen in the week ended Feb. 12 and 1.45% in the week ended Feb. 5.

Other sectors showing strength last week included metals mining (up 3.02%), primary metals processing (up 2.78%), energy exploration and production (up 2.17%) and automotive services (up 2.02%).

Although they were not among the leaders the week before, the metals miners have now been among the Top Five best-performing large-sized sectors in three weeks out of the last four, while the metals processors have been among the elite finishers now in four weeks out of the last five.

On the other hand, energy exploration and production had spent the previous six weeks on the Bottom Five list of the worst-performing large-sized sectors; in fact, E&P had been the single-worst performer in each of the previous two weeks – plunging 16.86% in the Feb. 12 week and 6.84% in the Feb. 5 week.

Automotive services was neither among the big losers or gainers over the previous two weeks.

Coal get clobbered

On the downside, only one major sector actually finished in the red last week – but it ended deep in negative territory, with coal mining tumbling by 10.33%.

It was coal’s 15th straight week in the Bottom Five, including the Feb. 12 week, when it had lost 13.42%, and was the absolute worst finisher for a third week out of the last five. On a longer-term basis, coal has now been among the Bottom Five in 18 weeks out of the last 19 – all but the week ended Nov. 6.

With only coal actually finishing in the red on the week, as noted, last week’s Bottom Five was filled out by sectors showing relatively small gains versus their much larger-gaining peers.

These included food stores (up 0.30%), real estate and amusement and recreation services (both up 0.41%) and health care (up 0.47%).

Health care had been among the Top Five finishers the previous week for the third time in four weeks, showing only a relatively modest 0.61% loss in a week in which most sectors had far bigger downturns.

Real estate had been in the Top Five in each of the two previous weeks, with a relatively modest 0.54% loss in the Feb. 12 week and a 0.33% gain in the Feb. 5 week.

Neither amusements nor the food stores had been among either the big gainers or big losers in the previous two weeks.

Retailers best for year

After seven trading weeks so far in 2016, miscellaneous retailing (up 2.32%) is the best-performing large-sized sector on a cumulative basis, its fifth consecutive week in the top spot.

Lodging (up 0.83%) was in the runner-up spot for a fourth straight week, after having spent the three weeks before that as third-best. In 2015, lodging had been the single-best finisher on the year, gaining 18.92%, on the strength of having held that exalted position over the last three weeks of the year and on a longer-term basis, in 43 out of the last 44 weeks of 2015.

Real estate (up 0.46%) moved up by one notch in the year-to-date rankings to third-best large-sized sector from fourth-best the week before.

Primary metals processing (up 0.19%) firmed to fourth-best on the year so far, even though it had not been among the cumulative leaders the week before.

Health care (down 0.25%) fell two notches in the standings, to just fifth-best on the year, after having been third-strongest for three straight weeks before that.

Primary metals processing was also among the weekly leaders, as noted.

Coal falls to YTD worst

On the downside, coal mining (down 36.86%) fell by two notches in the rankings, to absolute worst on a year-to-date basis from only third-worst the previous week and has now been the cellar-dweller in three weeks out of the last four.

Coal had actually started out the new year during the week ended Jan. 8 as only second-worst on the year, then improved, relatively speaking, to just third-worst in the Jan. 15 week and to fifth-worst in the Jan. 22 week, before finally heading for the bottom of the mineshaft during the weeks ended Jan. 29 and Feb. 5.

Before all of that, coal had ended 2015 as the absolute worst performer for the year, with a 35.31% loss, having had the biggest cumulative loss for 51 straight weeks last year. Coal had also been the single-worst large-sized performer in 2012, 2013 and 2014 as well.

Coal’s collapse helped energy exploration and production (down 29.24%) improve, relatively speaking, to only second-worst on the year from the worst in the Feb. 12 week, where it had been in three weeks out of the previous five; it has now been second-worst in two weeks out of the last three.

Oil and gas extraction (down 26.21%) likewise improved by one slot to just third-worst on the year from second-worst the week before that, where it had been in four weeks out of the previous five; however, O&G has now been third-worst in 16 weeks out of the last 20.

Oilfield services (down 12.17%) was fourth-worst on the year for a fourth consecutive week.

Midstream energy (down 7.25%) was fifth-worst for a second week in a row.

Coal mining was also the week’s worst finisher, as noted.

© 2015 Prospect News.
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