ARE WE TIED TO THE TEN YEAR?
Are mlps improving as 10 year yields rise. If these were normal times a rise in yields would be an issue but these are not normal times. The rise in yields in the 10 year are signalling an easing in credit tightness. That seems to be benefiting MLPS as we are the only group of stocks that i could find showing a gain since January 1st...we're up over 14% while the S&P is down 10 percent. So i'm looking for mlps to continue to lead the way higher as long as yields continue to rise.
We have earnings distribution numbers for Buckeye Partners and we see another boost in the payout. Same holds for Buckeye Holdings (BGH). This morning we have earnings from Teppco (TPP) and Magellan (MMP) is due out before the open. Holly Partners (HEP) which has been one of the better performers lately puts up earnings numbers this morning. Nothing doing on the upgrade downgrade list so far this morning.
One of the things we should be watching over the next few days is what happens after we go ex-distribution. It would of course be nice to see mlps hold their price levels after the payout support disappears for another 3 months. Note that Hiland Partners (HLND) and Hiland Holdings (HPGP) go ex-dis this morning and they have a buyout offer on the table above these levels so i would expect these 2 to not drop much after their payouts. We'll see about the others.
Sunoco Logistics (SXL) remains among the best mlp performers as it sits just under a 52 week high. And actually as i look at the longer term chart..its only a couple of points away from an all time high!
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4 comments:
It is interesting to note what is happening with TPP. It went XD on the 28th and has been down since, including another $1.00 today. Some of that might have to do with their earnings report and I hope it is not a harbinger of future indications.
steve
Another yet-unknown factor will be the changed mindset of many investors who have migrated from a buy and hold strategy to more of a trader's philosophy, taking profits on sectors after big runups and moving the money to more beaten-down sectors.
Also, we may be facing large amount of hedge fund redemptions next month.
Finally, if the general market swoons from here, MLPs may suffer disporportionately given their recent outperformance.
Bruce
The run-up of SXL is sure interesting. It was no more resilient to the market cave-in last fall compared to the heavyweights: KMP. EPD, OKS, MMP. In the last month, however, it is showing an anomalous divergence to the upside. I don't see anything particularly noteworthy or unique about SXL to cause this. Of course, the market has had such a disconnect from fundamentals for so long now, it's probably silly to think that it might be looking at this now. Maybe just a well-heeled firm building a position in a thinly traded partnership.
I think the MLP sector benefited a lot from the same factors as junk and corporate bonds. They are up over the past few months as Treasury investors have left looking for higher yield. MLP's that are in a good financial position obviously benefit is investors are leaving Treasuries in search of yield.
So while Treasury yields are rising they are still so low as to make them very unattractive relative to other higher yielding instruments.
Happy Trading,
TheMacroTrader.com
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