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Monday, October 18, 2010

CRITICIAL JUNCTURES EVERYWHERE!



There are interesections and crossroads looking everywhere this morning and we have to ask ourselves what are (if any) implications to last week's failed 30 year bond auction that sent yields in the 30 year back to 4%. First off lets be clear that this could be the first of several warning bells that will be sounded that long term rates have finally hit some sort of bottom. And if that is the case, will MLPS surrender their market leadership position. All this and the dow industrials are coming to the top of the range and poised for a breakout at 11,200. Lots of things to ponder here. The overall tape technically remains positive. MLPS are at the point where a correction is imminent which would mean down to 325-337 support zone. But i keep coming back to the bond auction and wonder whether investors are telegraphing that they are no longer going to accept sub 4% yields for bonds that dont mature until 2040. The mlp/treasury yield spread still remains so high above the long term normals of 2-3% that we could see raise rise by 100 basis points or so and not see much impact in mlp price. The extra spread is probably reflecting economic stress rather than yield stress. Still there is alot out there for us to pose the questions that the unrelenting 2 year mlp bull run may begin to slow down.

This morning on the news front we have Barclays and Morgan Keegan downgrading Copano Energy (CPNO) to market perform which will send the stock lower at the open. Morgan Keegan is also downgrading Markwest Energy (MWE) to market perform. Valuation is the reason for the downgrade. Energy Transfer Partners (ETP) is constructing 2 new pipelines. Seeking Alpha has this piece on Amerigas(APU) as a propane play this winter if a shortage in propane developes.

Markets are fairly flat this morning. Crude is now up, nat gas is down but off the lows. Rates are lower after Friday's spike higher. So wake up to a good Monday morning coffee and let the games begin.

1 comment:

JT said...

I expect the majority of MLP's to begin raising dividend payout next year, which should help the rally continue despite a rise in long term rates.