Advantage Data: Junk major-sector rally halted; coal mining worst; petroleum refining best

By Paul Deckelman

New York, Feb. 3 - The high-yield market suffered its first weekly loss in 2014 during the week ended Friday, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc. That snapped a winning streak of four consecutive weeks since the beginning of the year and 11 straight weeks of gains dating back to early November of 2013.

In the latest week, 40 out of the 61 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the red, with 20 sectors ending in the black and one sector closing unchanged, signifying neither a gain nor a loss on the week.

That represented a sharp reversal from the positive pattern seen in the previous week, ended Jan. 24, when 32 sectors out of the 60 measured posted gains, with 26 other sectors showing losses and two sectors unchanged. In the interim, Advantage Data recalculated and slightly expanded its roster of sectors.

The same reversal was seen 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. In the latest week, 22 of the 30 sectors closed in the red and eight finished in the black - versus the previous week, when 16 of those major sectors had closed in positive territory, 12 had negative returns and two were unchanged.

In the latest week, coal mining was the single worst finisher among the significantly sized sectors, while petroleum refining was the best.

Coal also had the dubious honor of being the worst performer so far on the year, while printing and publishing was the best.

Index under pressure

Statistical indicators of general market performance meanwhile were mixed on the week, after having turned lower across the board for the first time this year in the previous week.

The total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, suffered its second consecutive weekly loss, falling by 0.032%, on top of the 0.283% downturn seen the previous week, ended Jan. 24. That earlier loss had snapped a streak of 10 consecutive Fridays during which it had finished higher than the previous Friday, dating back to the week ended Nov. 15, 2013.

The index has now seen two weekly losses in 2014 so far, versus three weekly gains. In 2013, the index showed 33 weekly gains against 19 losses, versus 2012, when it notched 40 gains and 12 losses.

As of Friday, the index's year-to-date return had fallen to 0.74%, down from 0.772% the previous Friday and down as well from its high point for 2014 so far, 1.185%, recorded on Jan. 22. In 2013, the index had ended at 7.419%, its high point for the year - well above its 2013 low point of 0.384%, recorded on June 25, 2013 but well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 103.455, down from 103.6345 the week before and down as well from 104.1083 on Jan. 22, its high point for the year. However, it remained up from the 2013 year-end level of 103.3161; that latter figure, meanwhile, was well below the highest average price for 2013, 107.222488, set on May 9 of that year.

The index's yield to worst stood at 5.662% - its highest yield of 2014 so far - versus the previous Friday's 5.578%. It was also well up from 5.386% on Jan. 22, its low point for 2014 so far, although it remained below 5.671% at the end of 2013. While that year-end figure had come in markedly from its high point for the year of 6.853%, set on June 25, it still remained above its low yield for the year of 4.986% on May 9 - which was also the lowest all-time yield as well.

The index's spread to worst over comparable Treasury issues stood at 434 basis points on Friday, a new wide point for the year, having widened out from 424 bps the Friday before and from 398 bps on Jan. 22, its tightest level for 2014. It was also up from 418 bps on the last day of 2013. In 2013, the spread came in smartly from its wide point of the year of 536 bps, set on June 25, but still finished a little above its 2013 tight point of 414 bps on Dec. 30.

Coal crushed, refiners rally

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of coal mining companies (down 0.74%) having the worst loss of any of the significantly sized sectors. It was the third straight week that coal was languishing among the laggards, having also been there the week before with a 0.68% loss.

Also on the downside were food stores (down 0.48%), oil and gas exploration and production (down 0.29%) and non-computer electronics manufacturing (down 0.27%). The amusement and recreation, primary metals processing and non-depository credit institutions sectors were all down 0.26% on the week.

On the upside, petroleum refiners (up 0.33%) were the best performer among the significantly sized groupings. That represented a solid turnaround for the sector, which had actually been the single worst-performing major sector the week before, when it had plunged by 0.71%. But it was the sector's second finish among the Top Five best performers in the past three weeks.

Also showing strength in the latest week were paper manufacturing (up 0.21%), lodging (up 0.16%), precision instrument manufacturing (up 0.11%) and metals mining (up 0.10%).

It was the second consecutive week that the paper makers had been among the elite finishers; in fact, the sector had been the single-best-performing major sector the week before with a 0.32% gain.

Like petroleum refining, metals mining was rebounding from the previous week, when it had been among the worst finishers with a 0.47% loss. And also like the refiners, this week was the second week in the past three that saw the sector among the best finishers.

Coal in a hole

With five weeks in the books for 2014 so far, the coal mining sector - the week's worst performer, as noted - was clearly also the worst grouping on a year-to-date basis, showing a 0.48% loss. Coal had tumbled down to worst from only second-worst the week before.

Other year-to-date underachievers included real estate (up 0.05%), miscellaneous retailing (up 0.10%), food stores - one of the week's worst losers, as noted - (up 0.25%), and food manufacturing (up 0.33% on the year). The week before, second-worst real estate and third-worst miscellaneous retailing, had been tied for the worst year-to-date showing but were lifted off the bottom, relatively speaking, by the coal miners' plunge.

On the upside, printing and publishing (up 3.30%) jumped three positions to best year-to-date performer, after having been fourth-best the previous week.

Paper manufacturing (up 3.09%) slipped one position, to second-best, after having been the top cumulative performer for two straight weeks. Lodging (up 2.13%), the previous runner-up for two straight weeks, likewise dipped one notch, to third place, followed by fourth-best petroleum refining (up 2.00%) and fifth-best health care (up 1.64%).

Health care had been third-best the previous week before giving up two notches, while the refiners had not been among the year-to-date leaders the previous week. As noted, refining had the best showing of any significantly sized sector on a weekly basis, with paper manufacturing and lodging also among the Top Five best weekly finishers.

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