Advantage Data: Junk bond sectors see fourth straight improvement after recent loss

By Paul Deckelman

New York, Aug. 7 – The junk bond market was stronger for a fourth consecutive week last week, ended Aug. 4, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

It thus continued to rebound from its most recent loss, which had been seen during the week ended July 7.

While the past four weeks have seen strength, the several weeks before that had been choppy, with gains and setbacks alternating ever since a loss during the week ended June 23, which had snapped a five-week winning streak.

Last week marked the eighth winning week for the sectors out of the last 10 weeks, dating back to the week ended June 2, versus two negative weeks during that stretch.

For the year to date, a majority of the sectors have finished on the plus side in 25 weeks so far, while negative results have dominated in six weeks to date.

A subset consisting of the 33 largest sectors (out of the total of 60 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 24 of those sectors ending in the black last week, with nine finishing in the red.

That represented something of a retreat from the performance seen in the previous week, ended July 28, when 27 of those key sectors had shown gains and six had posted losses.

That week, in turn, was a softening from the enormously strong performance seen during the week ended July 21, when all 33 of those key sectors had ended on the upside, with not a single sector on the downside.

Among specific large-sized sectors during the week ended Aug. 4, coal mining had the best gain, while automotive services suffered the worst loss.

On a year-to-date basis, with 31 weeks of 2017 now in the books, lodging held the top spot on a cumulative basis for a second straight week, while food stores was the worst performer for the year so far, also for a second week in a row.

Coal mining tops the week

Coal mining (up 0.52%) was the best performer last week among the large-sized sectors.

Also showing strength last week were electric and natural gas utilities (up 0.45%), food manufacturing (up 0.29%), midstream energy (also up by 0.29% on the week) and building construction (up 0.28%).

It was the second straight week that food manufacturing finished among the Top Five best-performing large-sized sectors; the grouping also made it during the July 28 week with a 0.51% gain.

Automotive services skid

On the downside, automotive services – a sector that includes vehicle-rental companies – had the worst loss of any large-sized sector, swooning by 1.78%.

The downturn coincided with a fall in Hertz Corp. bonds across the company’s capital structure after the Estero, Fla.-based rent-a-car giant said that it had decided to scrap its planned redemption of its $450 million of outstanding 6¾% senior notes due 2019, saying in an 8-K filing with the Securities and Exchange Commission on July 28 that the conditions to the redemption had not been met.

Also among the week’s underachievers were chemical manufacturing (down 0.64%), food stores (down 0.59%), health care (down 0.25%) and oil and natural gas extraction (down 0.23%).

It was the second straight week among the Bottom Five worst-performing large-sized sectors for the chemical makers and health care; both had been among the laggards during the July 28 week with losses of 0.28% and 0.95%, respectively.

And it was the fourth straight week the food stores grouping has also had that dubious honor.

The grocers were the worst-performing key sector in both the July 28 week, falling by 1.03%, and the week ended July 14, when they were off by 0.05%, during a week when virtually all other major sectors were positing gains. And they had also been among the worst-finishers in the in-between week ended July 21, up an anemic 0.25% during another overwhelmingly positive week for just about everyone else.

The food stores sector has now been in the Bottom Five in six weeks out of the last eight, having also posted losses of 2.13% during the week ended June 23 and 1.53% during the week ended June 16 – the worst showing of any key sector that week.

Lodging stays on top for year

On a year-to-date basis so far, the lodging sector was the best performer for a second straight week and for its sixth week out of the last seven, with a 12.45% cumulative gain last week.

The innkeepers had returned to their recently familiar place as best year-to-date performer among the major sectors during the July 28 week, pushing out health care, which had temporarily displaced lodging during the July 21 week; the hoteliers had been the top cumulative performer over the four straight weeks before that.

Health care (up 9.24%) meanwhile battled back to the runner-up spot last week after having been pushed down to just third-best when lodging regained the top spot.

Amusement and recreational services (up 8.12%) moved up one notch in the rankings, to third-best on the year from just fourth-best the previous week, while chemical manufacturing (up 8.05%) fell back by two slots to just fourth-best on the year last week from second-best the week before.

Depository financial institutions (up7.84%) were fifth strongest on the year for a second week in a row.

Food stores worst on year

On the downside, food stores were at the bottom of the year-to-date rankings for a second straight week, posting a 1.57% cumulative loss – the only major sector in the red on a year-to-date basis last week.

Oil and natural gas extraction (up 0.37% on the year) was the second-worst key sector year-to-date for a second consecutive week.

Energy exploration and production (up 0.82%) fell to third-worst last week from fourth-worst the week before.

It switched places with miscellaneous retailing (up 1.73%), which had been third-worst previously, but has now been only fourth-worst in two weeks out of the last three.

Automotive services – the week’s biggest loser, as noted – repeated as fifth-worst on the year last week, its second straight week in that position, with a 2.83% year-to-date return.

© 2015 Prospect News.
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