Advantage Data: Coal keeps sliding as market extends slump; metals mining shows moxie

By Paul Deckelman

New York, June 15 – The junk bond market fell decisively for a second consecutive week last week, according to sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

The latest bout of weakness follows a now-ended three-week upturn, which had come after a two-week skid. That setback, in turn, had halted a six-week winning streak dating back to mid-March.

With 23 weeks now in the books so far this year, last week’s fall was just the seventh weekly retreat recorded so far this year, versus 16 weeks on the upside.

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 fully 27 of those more sizable sectors closing in the red during the week ended Friday, with only three sectors ending in the black – only slightly changed from the week before, ended June 5, when the overwhelmingly negative breakdown had stood at 28-to-2.

However, those levels the past two weeks have represented a sharp reversal from the trend seen the week before that, ended May 29, when 25 sectors had shown gains, four had suffered losses and one sector was unchanged on the week, showing neither a gain nor a loss.

Coal mining had the biggest loss among any of the significantly sized sectors for a seventh straight week and not surprisingly remained the worst year-to-date finisher among the big sectors for a 22nd successive week.

Metals mining was one of the few large-sized sectors not finishing in the red for the week. The lodging sector remained on top year to-date for a 15th week in a row.

Index retreats again

Other statistical indicators of general junk market performance were lower across the board last week versus where they had finished out the previous Friday, their second consecutive weekly loss and third such downturn in the past four weeks, a slide interrupted only by the upturn across the board during the week ended May 29.

The latest week was also the fourth week in the last seven during which the indicators were on the downside. Before that, the indicators had been mixed for two consecutive weeks and for four weeks out of the previous five, after having risen week over week for three weeks before that, dating back to late March.

The Merrill Lynch High Yield Master II index saw its second consecutive weekly retreat and its third negative week in the last three.

The index fell by 0.193%, on top of the previous week’s 0.739% drop, after having gained 0.159% the week before.

That brought its year-to-date return down to 3.093% as of Friday, down from 3.293% the week before. Those levels, in turn, were below the 4.062% at which it had ended on May 29, its peak level for the year so far.

The index had finished 2014 returning 2.503%.

Among its other components, Friday’s yield to worst had risen to 6.337% from 6.278% the Friday before. While it remained above the 5.843% seen on Feb. 27, its low for the year, the yield was still down from its 2014 year-end 6.448% level.

Its spread to worst over comparable Treasury issues widened to 474 basis points from the previous week’s 467 bps. It was wider than the 451 bps recorded on March 2 and again on March 3, its tightest spreads for the year so far, but it was still well in from the 513 bps reading seen on the last day of 2014.

Coal carnage continues

Back on a sector-by-sector basis, Advantage Data meanwhile showed the coal sector as the worst performer among the significantly sized groupings, plunging by 5.99% on the week.

It was the seventh straight week in which coal had the single worst results of any of those major sectors, including the previous week’s 4.51% downturn, a skid dating back to the week ended May 1.

Coal has now also been the worst large-sized performer in eight weeks out of the last nine, having also had that dubious honor during the week ended April 17, when it had dropped by 1.30%.

That losing streak was only interrupted during the week ended April 24, when coal atypically put on a rare – and short-lived – show of strength and led all of the key sectors with a 2.19% return. Then it was back to business as usual.

Additionally, coal has now been among the Bottom Five worst large-sized performers – sometimes the absolute worst, other times not – in 10 weeks out of the last 11, and in 13 weeks out of the last 15.

Other sectors ending solidly in the red this past week included real estate (down 2.59%), automotive services (down 0.65%), transportation equipment manufacturing (down 0.38%) and two sectors down 0.37% on the week – industrial machinery and computer manufacturing and wholesale durable goods distributors. The latter sector had been one of only two sectors finishing in the black the prior week, when it was up by 0.04%.

Metals miners hold their own

On the upside, for a second straight week, there wasn’t much to celebrate, with just three out of the 30 significantly sized sectors finishing in the black.

Of that trio, only metals mining (up 0.38%) managed to show a clear gain.

The other two sectors finishing on the positive side of the ledger didn’t have much of a margin of error to spare – precision instrument manufacturing (up 0.12%) and chemical manufacturing (up 0.07%).

Still it was the third straight week that the precision instrument makers – chiefly medical device manufacturers – had been among the Top Five best major-sector performers, having also made it during the week ended May 29, when the grouping had been up by 0.41%, and again during the week ended June 5, when it had been off by only a modest 0.10%, versus the larger losses posted by most of the other sectors.

As had been the case in that previous week, the latest week’s Top Five was filled out by sectors showing the smallest of losses, including petroleum refining (down 0.01%) and printing and publishing (down 0.03%). That latter sector had also been there during the June 5 week, when it was down by 0.15%.

YTD: Lodging again on top

On a year-to-date basis, the lodging sector (up 14.09%) was the best cumulative performer for a 15th consecutive week.

The food stores grouping (up 8.84%) was in the runner-up spot for a fourth consecutive week and for a fifth week in the last six.

Holding companies and other investment offices (up 4.92%) moved up by one notch in the rankings, to third-best on the year so far, after having been fourth-best for two consecutive weeks before that and for three weeks out of the previous four.

It switched places with the oil and natural gas exploration and production sector (up 4.66%), which fell by one position in the standings, to just fourth-strongest, after having been in third place the week before.

Miscellaneous retailing (up 4.07%) was fifth-strongest on the year for a second consecutive week.

Coal continues YTD struggle

On the downside, coal mining – the week’s worst finisher, as noted – also remained the worst year to date for a 22nd straight week, with a loss of 15.17%. As has been the case for a number of weeks, it was the only significantly sized sector finishing in the red on a cumulative basis.

Transportation equipment manufacturing (up 0.69%), one of the week’s underachievers, as noted, fell by one notch year to date, to second-worst, after having been just third-worst on the year for two straight weeks and in four weeks out of the previous five.

It traded places with the securities and commodities brokers, dealers and exchanges (up 1.25%), which improved – relatively speaking – to just third-worst on the year this past week, after having been the second-worst key sector for two consecutive weeks and for a total of seven weeks out of the prior eight, having been down there for five consecutive weeks at one point.

Non-depository credit institutions (up 1.99%) fell to fourth-worst on the year, despite not having been among the laggards the week before.

Paper manufacturing (up 2.07%) improved a little, relatively speaking, ending fifth-worst on the year after having been fourth-worst the week before.

© 2015 Prospect News.
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