Advantage Data: Junk bond sectors keep surging, post eighth straight weekly gain

By Paul Deckelman

New York, Jan. 17 – The junk bond market continued its winning ways during the most recent reporting week (ended Jan. 13), according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc.

It was the eighth consecutive week of strength, with nearly all significantly sized sectors ending in positive territory.

The sectors have been heading higher ever since decisively breaking out of a rut in late November, when they snapped a four-week-long losing streak.

Those four weeks of losses, running through the week ended Nov. 18, had, in turn, followed five straight weeks of gains before that, lasting through the week ended Oct. 21.

In the latest 10 weeks, dating back to the week ended Nov. 11, there have been eight weeks of gains, versus two weeks of losses during that stretch.

On a somewhat longer-term basis, in the 52 weeks of 2016, gainers dominated in 39 of those weeks, versus 13 weeks in which more negatives were seen.

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 29 of those bigger sectors finishing in the black last week, versus just four ending in the red.

That was a slight weakening from the nearly unanimous pattern of strength seen over the previous two weeks, ended Dec. 30 and Jan. 6, when 32 of those sectors had ended in positive territory, with just one sector each week actually posting a negative return.

The past eight weeks have represented a complete reversal from the week ended Nov. 18 – the most recent negative week recorded – when 29 of the sectors had shown losses, versus only three sectors ending on the plus side that week, as well as one unchanged sector showing neither a gain nor a loss on the week.

Among specific large-sized sectors during the Jan. 13 week, electric and natural gas utilities posted the biggest gain, while coal mining had the worst loss for a second consecutive week.

With two weeks now in the books for 2017, health care services has been the best-performing large-sized sector so far, while coal has been the worst performer – a full reversal of how both of those sectors had ended 2016.

Utilities lead weekly gainers

Electric and gas utilities turned in the strongest performance of any large-sized sector last week, as noted, rising by 0.57% on the week.

Also showing strength during the latest week were midstream energy services (up 0.54%), oilfield services (up 0.40%), holding companies and other investment offices (up 0.39%) and amusement and recreation services (up 0.38%).

Oilfield services made it three straight weeks among the Top Five best-performing large-sized sectors, having also been there during the Jan. 6 week, when it had gained 1.47%, and during the Dec. 30 week, when it had a 0.53% upturn.

On a longer-term basis, oilfield services has now been among the Top Five in five weeks out of the last seven, including the week ended Dec. 16, when it was up by 0.97%, leading all of the major sectors that week.

Coal stays in a hole

On the downside, coal mining lost 0.48%, the worst showing out of any of the large-sized sectors, as noted.

It was coal’s second consecutive week finishing in the red, having also done so during the Jan. 6 week with a 0.06% setback, when it was the only one of the large-sized sectors actually posting a negative return for the week.

Other sectors also showing losses last week were automotive services and chemical manufacturing (both down 0.09%) and miscellaneous retailing (down 0.02%).

Last week was a clear reversal for the chemical makers – the sector which includes recently volatile pharmaceutical manufacturers – which had turned in the strongest performance of any large-sized sector during the Jan. 6 week, rising 1.71% during that period to spend a second straight week in the Top Five; chemicals had also been in that select circle during the Dec. 30 week with a 0.51% gain.

However, the sector has now also been among the Bottom Five worst-performing large-sized sectors in three weeks out of the last five and in four weeks out of the last seven.

Miscellaneous retailing meantime was among the underperformers for a second week in a row last week, having also been there during the Jan. 6 week with a relatively sedate 0.41% gain, far smaller than most other sectors returns that week.

With just four of the large-sized sectors actually ending in the red, the latest week’s Bottom Five list was filled out by depository financial institutions, which gained a meager 0.03%.

Health care best, coal worst

On a year-to-date basis, health care has emerged as the best-performing major sector with a 2.37% cumulative return so far, followed by oilfield services (up 2.35%), oil and gas extraction (up 1.95%) weekly leader electric and gas utilities (up 1.81%) and lodging (up 1.77%).

On the downside coal’s repeat performance as the week’s worst-finishing large sector also keeps it at the bottom of the year-to-date rankings for a second consecutive week with a 0.52% loss so far, followed by miscellaneous retailing (up 0.38%), securities and commodities brokers, dealers and exchanges (up 0.47%), depository financial institutions (up 0.55%) and non-computer electrical and electronics manufacturers (up 0.56).

The year-to-date best and worst sectors so far, health care and coal, respectively, represent a full reversal of how those two sectors ended 2016, when coal mining had finished out the year with the best cumulative return (up 137.40%), holding the top spot for the last six weeks of the year and in 11 weeks out of the final 13.

Health care – despite a pair of strong weekly showings to end the year – had closed out 2016 with just a 5.47% cumulative return, the worst of any significantly sized sector for the last four weeks of the year.

© 2015 Prospect News.
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