The spread between the Alerian MLP Index and BBB corporate credit index further widened by 21 bps for the week ended April 5.
Higher natural gas prices and lower natural gas liquids prices continued to squeeze frac spreads lower last week in a negative catalyst for gas processing names.
The cold snap that occurred towards the end of the winter heating season should benefit propane distributor names next earnings season.
Last week saw a drop in propane prices, which is a theoretical positive for propane distributors though earnings may not be significantly affected given the end of the winter heating season.
Treasury rates continued to move lower last week, which is theoretically positive for the rate-sensitive MLP sector.
Yields on corporate credit (including that of the MLP sector) have continued to compress, which has resulted in cheap debt capital and therefore a positive environment for MLP growth.
The cost of equity for most MLPs has decreased dramatically since the financial crisis, and dividend yields continued to compress through the month of March.
Continued colder weather last week should benefit propane distributors’ earnings.
Fractionation spreads last week increased, in a positive short-term catalyst for MLPs with gas processing operations.
For the month of March, the spread between the Alerian MLP Index Yield and BBB corporate credit closed somewhat, but the gap still remains wide relative to the historical average.
US crude production has been climbing and is expected to continue to grow which is a long-term positive for MLPs with crude storage and transportation assets in geographic areas of high growth.
Propane prices rose last week which theoretically hurts propane distributors by reducing demand. However, this was likely nullified by colder weather last week that drove increased demand for propane by home heating customers and was probably the driver of the price increase.
Last week’s colder than normal weather resulted in a positive catalyst for propane distributor MLPs.
The month long rally in natural gas prices and generally flattish NGL prices have caused fractionation spreads to compress, a negative for some gas processing MLPs.
Last week, Treasury rates moved down slightly, which is theoretically positive for MLPs as they can be sensitive to changes in rates.
An overview of tax consequences for MLP investments.
Warmer weather for the week ended March 15 was a negative short-term indicator for propane distributors such as AmeriGas, Ferrellgas, and Suburban Propane.
Last week, yields on the ten-year Treasury moved down by 5 basis points. A continued compression in Treasury yields could be positive for MLP valuation.
Another drop in fractionation spreads last week is a negative driver for gas processing MLP names.
Last week, the yield on the ten year US Treasury moved up 20 bps, resulting in a short-term negative catalyst for MLPs which are rate-sensitive.