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March 31, 2011

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MLPs - All Sixes

While Japan and the Middle East are “at Sixes and Sevens”, MLPs are all Sixes
Wild ride, but almost a flat month – MLPs finished March negative for the month, the first negative month for the MLP Index since August of last year, so six consecutive positive months.  At the trough on March 15th, the index was down 6% for the month, but rallied hard (along with everything else) the past two weeks to finish only down 0.6% for the month.
Solid quarter – MLPs registered a total return of around 6% this quarter, the 9th straight positive quarter for MLPs.  The last time MLPs registered a down quarter was the 4th quarter of 2008.  The MLP Index closed the quarter with a yield below 6%, the last time that happened was the second quarter of 2007, right before the last crash in MLPs.
Not sure what that all means for the next few months, but it seems like with 10-year treasuries hovering around 3.5%, MLPs are still attractive on a relative basis and not near their all time spread to treasuries.  Plus as the next few quarters will bear out, MLPs can grow their distributions and therefore have advantages over other yield options.

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