Advantage Data: Energy sector improves as junk major sectors extend advance

By Paul Deckelman

New York, April 13 – The junk market was higher for a fourth straight week last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

That recent upturn has more than made up for a two-week slump in early March, which in turn had followed six consecutive weeks of gains before that.

Last week’s upturn was the 11th recorded so far this year, against three weeks on the downside.

A subset of the 30 most significantly sized sectors (out of the total of 58 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 27 of those more sizable sectors closing in the black during the week ended Friday, with only three sectors ending in the red.

That exact 27-to-3 numerical breakdown – though involving different sectors – had also been seen the week before, ended April 3.

In the latest week, oil and natural gas exploration and production – given a boost by stronger world crude oil prices – turned in the best performance of any of those large-sized sectors, while the securities and commodities brokers, dealers and exchanges sector was the biggest loser.

On a year-to-date basis, lodging remained the best cumulative performer for a sixth straight week, while coal mining was the worst for a 13th week in a row.

Index adds to gains

Other statistical indicators of general market performance, meanwhile, were higher across the board last week versus where they had finished out the previous Friday, for a third successive week on the upside. Those gains followed their having been mixed the week before that – which, in turn had followed two straight weeks when those indicators had moved lower all around.

The upturn was led by the Merrill Lynch High Yield Master II index, which, like the overall junk market, posted its fourth straight weekly gain.

The index rose by 0.764% on the week as of Friday’s close, versus the previous week’s 0.317% advance.

The index’s year-to-date return so far as of Friday had risen to 3.41% – a new peak level for the year so far – versus 2.626% at the end of the previous week.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst stood at 5.964%, in from 6.169% a week earlier, although it still remained above the 5.843% seen on Feb. 27, its low for the year. However, the yield was well below its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues stood at 471 basis points, considerably tighter than the previous week’s 494 bps level, although it was still wide of the 451 bps recorded on March 2 and again on March 3, its tightest spreads for the year so far. But it was in from the 513 bps reading seen on the last day of 2014.

Oil and gas on the move

Back on a sector-by-sector basis, Advantage Data meanwhile showed the oil and gas E&P grouping posting the best performance by any of the significantly sized sectors, returning 2.28% on the week, helped by a surge in oil prices during the earlier part of last week.

Last week’s performance was a far cry from the week before, when the energy credits had been among the Bottom Five worst performers for a fourth straight week out of the most recent five, losing 0.52%.

Other large-sized sectors showing strength this past week included petroleum refining (up 0.73%), automotive services (up 0.65%) and the chemical manufacturing and telecommunications sectors, which were each up by 0.63%

It was the second straight week among the Top Five best-finishing sectors for both the refiners and telecom, which had been there the previous week with returns of 1.02% and 0.71%, respectively, with the refiners actually turning in the best performance of any of the larger-sized sectors during that week ended April 3.

Market firms get mauled

On the downside, securities and commodities brokers, dealers and exchanges posted the worst performance by any of the significantly sized sectors, plunging by 2.56% on the week.

Other large-sized sectors showing losses last week included metals mining (down 0.17%) and coal mining (down 0.02%). As had also been the case during the April 3 week, last week’s Bottom Five list was filled out by a pair of sectors showing only feeble gains for the latest period – food manufacturing (up 0.11%) and food stores (up 0.12%).

It was the second straight week that the metals miners were among the underachievers, and their fourth such week in the last five. The metals miners, in fact, had been the single worst-performing sector the week before, when the grouping had slid by 2.82%.

It was also the second straight week near the bottom for long-time loser coal, which had been there the previous week with a 1.15% drop, and which has now been among the worst sectors in five weeks out the last six.

Coal and metals mining have consistently been among the worst finishers in most of the 14 weeks seen since the start of the year.

YTD: Lodging stays on top

On a year-to-date basis, the lodging sector (up 10.80%) was the best cumulative performer for a sixth consecutive week.

Petroleum refining (up 6.05%) – one of the week’s best performers among the major sectors, as noted – moved up by one notch in the standings last week to second-best on the year from just third-best the week before.

The refiners thus traded places with the previous week’s runner-up – food stores (up 5.86%), which moved down by one slot to just third-best last week after having been Number-Two for three straight week before that.

Depository financial institutions (up 4.24%) were fourth-best on the year for a second consecutive week.

Telecommunications (up 4.14%) improved to fifth best, despite having not been among the leading year-to-date performers the week before.

On the downside, coal mining remained the worst finisher year to date for a 13th straight week, with a 3.94% cumulative loss.

Metals mining (down 0.93%) was second-worst on the year for a second straight week.

Wholesale durable goods distributors (up just 1.27%) slipped two notches to third-worst on the year from “only” fifth-worst the week before.

Transportation equipment manufacturing (up 1.30%) and industrial machinery and computer makers (up 1.49%) were fourth- and fifth-worst on the year, respectively, among the larger-sized sectors, despite neither sector having been among the worst year-to-date laggards the week before.

© 2015 Prospect News.
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