Advantage Data: Junk sectors rebounded last week from first loss after four straight gains

By Paul Deckelman

New York, Aug. 21 – The junk bond market was on the rebound last week, ended Aug. 18, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

It was bouncing back from the decisive loss it had suffered the week before, ended Aug. 11, which had been the first loss the sectors had seen since the week ended July 7, snapping a four-week winning streak.

The up-down-up movement of the past several weeks has represented a return to the pattern of choppiness seen earlier in the summer; outside of the aforementioned four-week winning stretch, gains and losses have essentially been alternating ever since a loss during the week ended June 23, which had snapped a five-week winning streak.

Last week marked the seventh positive week for the sectors out of the last 10 weeks, dating back to the week ended June 16, versus three negative weeks during that stretch.

And for the year to date, a majority of the sectors have finished on the plus side in 26 weeks so far, while losses have dominated in seven 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 18 of those sectors ending in the black last week, with 14 finishing in the red and one other sector unchanged on the week, showing neither a gain nor a loss.

That stood in stark contrast to the pattern seen during the Aug. 11 week, when 31 of the large-sized sectors had suffered losses that week, versus only two which had shown gains.

And while last week was a winning week overall, it still represented a pullback from the strength seen during the four-week winning streak, including in the week ended Aug. 4, when 24 of the large-sized sectors had posted gains that week, versus nine which had shown losses.

Among specific large-sized sectors during the week ended Aug. 18, automotive services led all sectors for a second week in a row, while coal mining suffered the worst loss on the week.

On a year-to-date basis, with 33 weeks of 2017 now in the books, lodging held the top spot on a cumulative basis for a fourth straight week, while oil and natural gas extraction fell to the absolute bottom of the pile, displacing food stores, which had been the worst performer for the year so far over the previous three weeks.

Autos on top again

The automotive services sector made it two straight weeks leading the field, racing ahead of the other sizable sectors with a 0.57% gain.

During the Aug. 11 week, automotive services and real estate had been the only two sectors not showing losses for the week, each of them up by a meager 0.07%.

That week had seen the autos grouping accomplish the relatively unusual feat of having gone from worst to first – the sector, which includes vehicle-rental companies – had the worst loss of any large-sized sector during the Aug. 4 week, swooning by 1.78%.

That downturn had 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.

Traders theorized that the bonds have snapped back over the past two weeks, after having been oversold the week before.

Other key sectors showing strength last week included metals mining (up 0.52%), amusement and recreational services (up 0.36%), transportation equipment manufacturing (up 0.27%) and food manufacturing (up 0.24%).

After having taken a hiatus during the Aug. 11 week, the food processors have now been among the Top Five best-performing large-sized sectors in three weeks out of the last four, having also made it during the Aug. 4 week with a 0.29% gain and a 0.51% gain the week before that, ended July 28.

Coal mining gets buried

On the downside, coal mining lost 0.99% last week, the most of any large-sized sector.

Other key sectors posting sizable losses included miscellaneous retailing (down 0.18%), oil and natural gas extraction (down 0.17%), energy exploration and production (down 0.15%) and securities and commodities brokers, dealers and exchanges (down 0.12%).

It was the second week in a row that the energy E&P sector has been among the Bottom Five worst-performing large-sized sectors, having also had that dubious honor during the Aug. 11 week, with a 1.51% loss.

And it was the third week in a row there for oil and gas extractions, having also lost 1.43% during the Aug. 11 week and 0.23% during the Aug. 4 week.

Lodging on top for year

On a year-to-date basis so far, the lodging sector was the best performer for a fourth straight week and for its eighth week out of the last nine, with a cumulative gain of 11.91% last week.

Chemical manufacturing, including pharmaceuticals (up 8.60%), was in the runner-up slot for a second straight week and a third week out of the last four.

Amusement and recreational services (up 7.99%) rose by one rung on the ladder to third-best on the year from just fourth-best, the week before, and has now been Number-Three in two out of the last three weeks.

Health care – not among the recent cumulative leaders, but one of the weekly leaders, as noted, improved to fourth-best on the year with a 7.83% gain.

Depository financials services (up 7.79%) fell by two notches, to just fifth-best on the year from third-best the week before and has now been in that Number-Five slot in three weeks out of the last four.

Oil and gas extraction worst

On the downside, oil and natural gas extraction was at the bottom of the year-to-date rankings last week with a 0.95% cumulative loss.

It lost one notch in the standings, having only been second-worst on the year the week before.

That also pulled down energy exploration and production (down 0.94%) which previously had been third-worst for two weeks in a row, and miscellaneous retailing (up 1.29%), which declined to third-worst after having only been fourth-worst for the previous two weeks.

Food stores (up 1.49%) jumped three slots, to just fourth worst on the year, after previously having been the absolute worst finisher over the previous three weeks.

And coal mining – the week’s worst performer, as noted – fell to fifth worst on the year with a 3.38% cumulative return.

© 2015 Prospect News.
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