Advantage Data: Coal mining, brokers lead major junk sectors slide as long winning streak snapped

By Paul Deckelman

New York, Feb. 4 - The high-yield market suffered its first weekly loss in the period ended Friday after 10 consecutive weeks on the upside, a winning streak which dated back to last November. It was also its first loss of 2013 against four consecutive gains so far, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Additionally, last week marked only the fourth loss in the last 15 weeks.

A sizable majority of the sectors were in the red - a sharp reversal of the pattern which had been seen over the course of many weeks recently.

Out of the 69 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 52 finished in the red last week and 17 sectors finished in the black.

That represented a huge reversal from the previous week, ended Jan. 25, when 64 sectors showed gains and six showed losses (in the interim, Advantage Data recalculated and slightly contracted its roster of sectors, bringing the overall number down to 69 from 70 the week before).

The plunge into the red in the overall market was even more pronounced in the behavior of the 30 most significantly sized sectors, as measured by the number of bond issuers, the collective number of issues tracked and their total face amount outstanding; All 30 of those bigger sectors posted losses in the latest week, against no gainers - a complete reversal of the results the week before, when 29 of the sectors closed out the week with a gain, against just one sector ending on a down note.

Among specific major sectors in the latest week, bonds of coal mining companies and financial brokers and exchanges showed the biggest losses. There was no upside as such, although non-depository credit institutions and metals mining posted considerably smaller losses than other key sectors.

Statistical indicators of general market performance showed their first weekly loss after 10 weeks of gains, including the total year-to-date return as measured by the widely followed Merrill Lynch High Yield Master II index.

Finally, a loss

The Merrill index showed junk bonds with a one-week loss of 0.54% as of the close Friday, following the previous week's 0.424% rise.

It was the first loss after 10 weekly gains dating back to November of last year and the first so far this year against four weekly gains. The index finished 2012 with 40 weekly gains versus 12 weekly losses.

The index's year-to-date return stood at 1.419% on Friday, down from 1.97% the week before and down as well from its 2013 peak level of 1.991%, just set on this past Monday. It had finished 2012 with a cumulative return of 15.583%, just a little below the peak for the year of 15.589%, set on Dec. 20.

Among its other components, the index showed an average price of 105.153 on Friday, down from 105.898 the previous Friday though still up from 104.352 on the final day of 2012. Its yield to worst stood at 5.847%, versus the week-earlier yield of 5.601% and its year-end yield of 6.083%. Its spread to worst over comparable Treasury issues widened to 496 basis points from 476 bps the week before, though it was in from 523 bps at year-end.

Coal, brokers lead collapse

Back on a sector basis, Advantage Data meanwhile showed the bonds of coal mining companies having the biggest loss on the week at 0.99%. It was a sharp comedown for coal, which had been among the best-performing major sectors in each of the previous two weeks, including the Jan. 28 week, when it had risen by 0.65%.

Other significantly sized sectors showing sizable losses in the latest week included financial brokers and exchanges (down 0.86%), automotive services (down 0.68%), petroleum refining (down 0.67%) and telecommunications (down 0.56%). It was the second straight week among the Bottom Five worst performers for telecom, which had also been there the week before with a meager 0.21% gain.

There was no upside as such among the major sectors, but non-depository credit institutions had the smallest loss, at 0.04%. The sector had been among the worst performers the week before, when it had edged up by 0.08%.

Other key sectors showing smaller losses than most included metals mining (down 0.06%) and three sectors - food stores, machinery and computer manufacturers and publishing - each down 0.12%.

It was the eighth straight week that the metals mining group has been among the best - or, in this case, the least worst - finishers, having also been there the week before with a 0.49% gain. It was the food stores' fourth consecutive week of being among the elite performers, having earned that distinction the week before with a 0.73% rise.

Food stores lead for year

Five weeks into 2013, the food stores sector - which, as noted has been among the Top Five finishers in each of the past four weeks, including two weeks when it was the absolute best performer - was leading the key sectors on a year-to-date basis for a third straight consecutive week, with a 5.03% cumulative return.

Metals mining was second-best for a third straight week with a 2.61% year-to-date return. Lodging, which had shared runner-up honors the week before, slipped back to third place with a 2.41% return, followed by metals processing (up 2.06%).

Among the year-to-date underachievers, coal mining - on the basis of its producing the worst showing for the week, as noted - slipped into the red with a 0.22% loss. Real estate, the previous week's worst year-to-date laggard, improved by one position to second-worst, with a 0.43% gain, followed by insurance carriers (up 0.55%), non-depository credit institutions (0.72%) and electric and gas utilities (up 0.82%).

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