Advantage Data: Junk bond sectors plunge for first time after 11 straight weeks of gains

By Paul Deckelman

New York, May 9 – The junk bond market deteriorated sharply last week – its first downside week after 11 consecutive weeks on the upside before that, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

In the 18 weeks since the start of the year, gainers have dominated in 12 of those weeks, versus six weeks in which more negatives were seen.

The now-snapped winning streak had begun during the week ended Feb. 19 and had extended through the week ended April 29. Besides that long string of gains, the sectors had also done better during the week ended Jan. 29, after having started the new year with three straight weeks on the downside and having racked up losses in five out of the first six weeks of the year.

A subset consisting of the 33 largest 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 bigger sectors finishing in the red last week, versus five sectors ending in the black and one sector unchanged on the week, showing neither a gain nor a loss.

That was a sharp reversal from the week before that, ended April 29, when 30 of those large-sized sectors had shown gains, just two sectors posted losses and one sector had been unchanged.

Among specific large-sized sectors last week, several energy and metals sectors, which had shown remarkable strength over the previous few weeks, tumbled to the very bottom and posted the worst losses on the week, led by coal mining.

Lodging was the best performer out of the relative handful of large-sized sectors actually showing gains on the week, with electronics manufacturing following closely behind.

Metals mining remained the best performer so far on a year-to-date basis for a 10th straight week, while automotive services skidded to the bottom of the year-to-date rankings for the second week in a row.

Energy, metals fall

Among specific large-sized sectors, coal mining turned in the worst performance of any large-sized sector last week, losing 4.52%.

That was a change from the week before, when coal, atypically, had been among the Top Five strongest performing large-sized sectors with a 1.38% return, its second week out of the prior four when it was among those elite finishers.

But the volatile sector has also recently been in its more familiar position among the biggest losers, where it has spent most of the year so far.

Last week marked the third time in the last four weeks that coal was the single worst performer, having also gained that unwanted distinction during the week ended April 15, when it was down by 0.32% and the week ended April 22, when it nosedived by 8.98% on the week – the only sector actually showing a loss in both of those otherwise all-positive weeks.

Other major sectors making up last week’s Bottom Five list of the biggest losers included energy exploration and production (down 2.56%), metals mining (down 2.35%), oil and natural gas extraction (down 2.29%) and oilfield services (down 1.89%).

Energy E&P, metals mining and oil and gas extraction had all been among the Top Five in each of the three previous weeks; during the April 29 week, energy E&P had been there with a healthy 2.99% gain on the week, while metals mining and oil and gas extraction had done even better, tying for the top spot, each with a 3.08% return on the week.

That week was the third straight week during which metals mining had the best showing; it had also been the top finisher in the April 22 week (up 5.24%) and before that, the April 15 week (up 5.43%).

Oilfield services, on the other hand, had not been among the big losers over the previous few weeks, although it too had been in the Top Five in the April 15 and April 22 weeks.

Lodging leads gainers

Among the relatively few large-sized sectors finishing in the black last week, lodging (up 0.56%) had the best showing, barely edging out non-computer electronic equipment manufacturing (up 0.55%).

Also showing relative strength in the latest week were securities and commodities brokers, dealers and exchanges (up 0.34%), paper manufacturing (up 0.17%) and printing and publishing (up 0.01%).

Holding companies and other offices were unchanged on the week, with a flat 0.00% reading.

The financial brokers, dealers and exchanges sector had been among the weaker performers during the April 29 week, up a sedate 0.14% versus larger returns posted by most other sectors.

Last week’s other gainers, meanwhile had not been among the Top Five over the previous few weeks.

Metals mining tops on year

On a year-to-date basis, with 18 trading weeks in the books so far for 2016, metals mining (up 29.79%) remained as the best-performing large-sized sector on a cumulative basis for 10th straight week, despite having been among the week’s worst performers, as noted.

Primary metals processing (up 17.38%) was in the runner-up spot, also for a 10th straight week.

Energy exploration and production (up 13.40%) moved up by one notch to third-best on the year from only fourth-best before, despite having also been among the week’s big losers.

That, in turn, allowed midstream energy services (up 12.35%) to also move up by one slot in the rankings, to fourth-best on the year from only fifth-best before.

Lodging (up 11.11%) – the week’s top performer, as noted – rose to fifth-best on the year last week, after having not been among the cumulative leaders the week before. However, it was the second week out of the last three that the hoteliers had been among the year’s top finishers so far, having held down fourth place during the April 22 week.

Lodging had also consistently been among the cumulative leaders, holding other positions in the rankings, for most of the weeks since the start of the year, and it had been the single best performing large-sized sector for all of 2015, returning 18.92% on the year, in first place for 43 of the last 44 weeks of the year.

Autos lag on year

On the downside, automotive services (up 1.60% on the year) had the weakest showing of any large-sized sector on a year-to-date basis for a second straight week, after having slipped by four full notches in the standings, from merely fifth-worst, the week before that.

Non-computer electronic manufacturing (up 2.50%) fell to second-worst on the year, despite having been among the week’s best finishers, as noted, and despite having not been among the year’s worst performers the week before.

Food stores (up 2.89%) was the third-weakest sector on the year so far, despite also having not been among the big cumulative losers the week before.

Paper manufacturing (up 2.90%) improved to just fourth-worst on the year from second-worst previously, apparently helped by its relatively strong weekly performance, as noted.

Depository financial institutions (up 2.99%) was the fifth-worst sector for a second consecutive week.

© 2015 Prospect News.
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