Advantage Data: Coal mining, real estate the worst as major junk sectors' plunge continues

By Paul Deckelman

New York, June 17 - The high-yield market suffered its fifth straight weekly setback in the period ended Friday, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

The current downward skid began during the week ended May 17, which had snapped a winning streak of 13 consecutive weeks before that in which junk had shown gains, dating back to the week ended Feb. 15, when it had broken out of a two-week slump.

While the recent trend has been decisively negative, the latest results actually marked only the seventh loss that the junk market has seen so far this year, against 17 weekly gains for 2013.

Aside from the latest cluster of consecutive weekly losses, the other downturns had occurred back to back in the weeks ended Feb. 1 and Feb. 8. On a longer-term basis, last week marked the 10th loss in the last 34 weeks, versus 24 gains during that time. Besides the now-ended 13-week winning streak, a 10-week stretch of consecutive weekly gains between last November and the week ended Jan. 25 also helped to account for much of those gains.

For a second consecutive week, 58 of the broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the red. The latest week saw seven sectors ending in the black, versus five sectors the week before, ended June 7. In the interim, Advantage Data recalculated and slightly expanded its roster of sectors.

The overall market's fifth straight week on the downside was also reflected 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. Some 28 of those larger sectors ended in the red this past week, against just two finishing in the black, although that represented a marginal improvement over the previous two weeks, when all 30 of those key sectors were showing losses and none had posted any gains.

Among specific major sectors in the latest week, bonds of coal-mining concerns and real estate operators had the worst showings, while those of food store and food manufacturing companies actually finished in the black, however slightly.

Statistical indicators of general market performance remained lower across the board, including the total year-to-date return as measured by the widely followed Merrill Lynch High Yield Master II index; the latter market measure showed its fifth consecutive weekly loss.

Index retreat continues

The Merrill Lynch index showed junk bonds having fallen by 0.477% for the week as of the close Friday, versus its 0.802% loss the week before. The index has now seen 16 gains so far in 2013 against eight losses. It had finished 2012 with 40 weekly gains versus 12 weekly losses.

As of Friday, the index's year-to-date return stood at 2.919%, down from 3.413% at the end of the previous week, and well down from its peak level for the year so far of 5.835%, recorded on May 9. The index had finished 2012 with a cumulative return of 15.583%, just a little below its peak for the year of 15.589%.

Among its other components, the index showed an average price of 103.316 on Friday, down from 103.965 a week earlier.

Its yield to worst stood at 6.127%, up from 6.004% a week earlier, although down from its most recent high point for the year, 6.267% reached on Thursday. It had hit its low yield for the year - the lowest all-time yield as well - of 4.986% a little more than a month earlier, on May 9.

The index's spread to worst over comparable Treasury issues widened out to 509 basis points from 494 bps the week before, although it was a little tighter than its new 2013 wide point of the year of 516 bps, set on Thursday. Its tightest level for the year so far has been 427 bps, also set on May 9.

Coal mining caves in

Back on a sector basis, Advantage Data meanwhile showed the bonds of coal-mining companies having suffered the biggest loss of any of the significantly sized sectors, as they slid by 0.94% in the week ended Friday. It was the miners' second consecutive week among the Bottom Five worst performers, with the sector having also been there week before, when it lost 1.08%.

Other major sectors showing sizable losses in the latest week included real estate (down 0.68%), lodging (down 0.64%), metals mining (down 0.63%) and the oil and gas exploration and production and petroleum refining sectors, both of which were down 0.60% on the week. None of those sectors had been among the biggest losers the previous week.

On the upside, bonds of food store operators posted a 0.06% gain on the week, the best of any significantly sized sector. It was the second straight week the grocers have been among the relatively better-performing sectors, having also been there the week before with a 0.30% loss, considered small versus the downturns most other sectors saw that week.

Food manufacturers' bonds had edged up by 0.01% in the latest week, the only other sector actually finishing in the black.

Rounding out the week's Top Five list of relatively stronger performers were non-depository credit institutions (down 0.02%) and the health care and telecommunications sectors (each down 0.18%).

It was the second straight week during which the non-depository credit names and health care had shown relative strength; the week before, they had somewhat smallish respective losses of 0.50% and 0.17%, with health care having been the smallest loss of any major sector. On the other hand, telecom had been among the worst finishers the previous week for a third straight time, when it was down 0.90%.

Food stores on top for year

Twenty-four weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 22nd straight week, posting a cumulative return of 11.61%. It was the first and has so far remained the only major sector to hit double digits on a percentage basis this year.

For a second consecutive week, insurance carriers were in the runner-up position and the publishing and printing sector held third place, with year-to-date returns of 6.13% and 5.95%, respectively. Non-computer electronics manufacturing, which had not been among the previous week's year-to-date leaders, jumped into the fourth-best spot at 5.05%, while health care held fifth place for a second straight week with a 4.60% cumulative return.

Among the year-to-date underachievers, coal mining - not among the previous week's year-to-date laggards - had shrunk to a 1.02% cumulative return, the worst among any of the major sectors, displacing telecommunications, which had been at the bottom of the pile for three straight weeks before that. The miners' standing was hurt by two straight weeks of having been among the biggest weekly losers, as noted.

Coal was followed, in ascending order, by real estate (up 1.85%), electric and gas utilities (up 1.93%), metals mining (up 1.99%) and telecom (up 2.26%). All had been among the big year-to-date losers the week before as well.

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