Advantage Data: Paper pops as junk major-sector rally continues, coal winning streak snapped

By Paul Deckelman

New York, Sept. 4 - The high-yield market recorded its 13th straight week of gains last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc.

The latest data showed a solid majority of the sectors notching advances, as the market continued to extend the gains it has racked up since breaking out of a choppy performance pattern seen from mid-May through mid-June, when it had alternating weeks of advances and losses.

Besides the 13-week winning streak, on a longer-term basis, there have been just four losses in the 35 completed weeks since the start of the year, versus 31 advances.

Of the 73 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 59 finished in the black last week, while seven sectors ended in the red. One sector had a flat, 0.00% reading, indicating neither a gain nor a loss on the week, and six other sectors did not show any statistically meaningful activity of any kind.

That represented a slight pullback from the very strong showing the week before, ended Aug. 24, when 65 sectors had posted gains and just five showed losses. In the interim, Advantage Data recalculated and expanded its roster of sectors, bringing the total number of sectors that it follows up to 73 this past week from 70 previously.

But the generally robust trend was evident among 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. There were 26 such sectors ending in the black this week and only three in the red, while one other sector - metals processing - showed neither a gain nor a loss. The week before, 28 of those sectors showed gains and there were just two showing losses.

Among specific major sectors in the latest week, bonds of paper manufacturers had the best showing of any of the significantly sized sectors, while the volatile bonds of coal mining companies - frequently among the worst performers for much of the year but recently showing uncharacteristic strength - reverted to form, with the biggest loss.

Statistical indicators of general market performance were up on the week, while the total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, showed a second straight week on the upside.

Index extends gains

The Merrill Lynch index showed junk bonds with a one-week gain of 0.273% as of the close Friday, versus the previous week's 0.436% advance; that rise the previous week had represented a reversal from the week before that, ended Aug. 17, which saw the index's first downturn following 10 consecutive weekly advances, dating back to early June. There have now been 27 weekly gains so far this year, against just eight weekly losses.

The index's year-to-date return had strengthened to 10.444% as of Friday from the previous week's 10.143%. Friday's finish marked a new peak level for 2012, and the highest seen in 20 months, since the 15.19% year-to-date return notched back on Dec. 31, 2010. The index had finished 2011 with a 4.383% return, and its highest reading last year was 6.362%, recorded on July 26, 2011.

Other components of the Merrill Lynch index were mixed on the week. The index showed an average price of 102.390, versus the previous week's price of 102.254. However, its yield to worst rose to 6.759% from 6.737%, while its spread to worst over comparable Treasuries widened out to 608 basis points from 600 bps the week before.

Papermakers show power

Back on a sector basis, Advantage Data meanwhile showed bonds of paper manufacturing companies having the best return for the week of any of the significantly sized sectors; they were up by 0.69%. It was the third consecutive week the papermakers had been among the best performers, including the week ended Aug. 24, when they rose by a nearly identical 0.68%, and the week before that, when they had gained 0.28%.

Among other notable gainers in the past week were lodging (up 0.44%), insurance carriers and publishing (both up 0.37%) and the amusement, automotive services and wholesale durable goods distribution sectors (all up 0.34%).

It was the second consecutive week among the top finishers for the insurers and the publishers; each had been among that elite group the week before, with returns of 0.65% and 0.81%, respectively.

After climb, coal clobbered

On the downside, the coal-mining sector's recent atypically strong showing came to an abrupt end, as the sector plunged by 1.14%. That sector had the dubious honor of having gone from first to worst; the week before, coal had been the single best-performing major sector with a 1.32% return. In fact, the latest week's loss actually snapped a four week-long streak during which coal had led all the other key sectors for that whole time.

Coal remains easily the most volatile of all of the major sectors; in the week ended July 27 - just before the four-week winning streak began - the miners had lost more than any other key sector, finishing down 1.62%.

Going all the way back to mid-May, there has been a long stretch of weeks in which coal has been either among the top finishers - including twice previously before the most recent four weeks when the group had been the strongest sector of all - alternating with weeks in which it has been among the worst performers, including three previous times before the July 27 week when coal had been the absolute biggest loser of all among the key sectors.

Apart from coal, metals mining was down 1.02% and financial brokerages and exchanges eased by 0.03%. Rounding out the Bottom Five list were metals processing, which was unchanged on the week, its 0.00% reading showing neither a gain nor a loss, as well as oil and natural gas exploration and production companies, which were up just 0.03%.

The metals miners, metals processors and financial brokers were all among the underachievers for a second consecutive week; the week before, they had been down 0.10%, down 0.02% and up 0.21%, respectively, with the metals miners having the worst showing of any significantly sized sector.

Real estate leads for year

Thirty-five weeks into 2012, real estate remains the best-performing major sector on a year-to-date basis, with a cumulative return of 22.21% - its 13th consecutive week in the top spot and on a longer-term basis, the 28th week there out of the past 31.

Non-depository financial institutions (up 16.21%) moved into the runner-up position, followed by the depository financials (up 15.87%). They leap-frogged ahead of building construction (up 15.83%) - the sector which had temporarily displaced real estate as the year-to-date leader back in the week ended June 1 but which then went back to its more usual second-place spot and stayed there for the next 12 weeks, before finally being shoved aside this past week.

Among the underachievers, coal fell back into the red (down 1.28%), just a week after having finally clawed its way back into the black on a year-to-date basis after many weeks; it is the only significantly sized sector to be showing a loss on the year so far. Food stores, hurt by a string of recent poor weekly performances, were returning 4.29%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.