MLPs’ Sluggishness Continued in the Week Ending March 2

AMZ fell 2.7% last week

MLPs’ sluggishness continued in the week ending March 2, 2018. The Alerian MLP Index (^AMZ), which includes 50 energy MLPs, fell 2.7% last week and ended at 258.3. AMZ has fallen 4.4% in the past two weeks. At the same time, the Alerian MLP ETF (AMLP) has lost 4.1%. The Energy Select Sector SPDR ETF (XLE) has lost 0.3% during the last two weeks.

MLPs’ Sluggishness Continued in the Week Ending March 2

MLPs’ recent weakness could be attributed to weakness in crude oil and particularly strong US Treasury yields. The US ten-year Treasury yield fell last week from YTD highs of 2.9%. However, the yield is still higher than historical averages. High US bond yields make MLPs, which are generally high yielding, look relatively unattractive due to their higher risk. A high bond yield results in a higher cost of capital.

Out of the 92 MLPs, 73 ended in the red, one remained unchanged, and the remaining 18 ended in the green. Among the top MLPs, Energy Transfer Partners (ETP), Williams Partners (WPZ), and Enterprise Products Partners (EPD) fell 6.4%, 2.5%, and 2.4%, respectively, while Plains All American Pipelines (PAA) rose 1.2%. Last week, Energy Transfer Partners’ plunge could be attributed to the conduction stopping at its Bayou Bridge pipeline. Read What’s Eroding Energy Transfer Partners’ Post-4Q17 Gains? to learn more.

Fund flows

The Alerian MLP ETF (AMLP) saw a net outflow of $122.4 million funds last week, while the J.P. Morgan Alerian MLP Index ETN (AMJ) saw a net inflow of $3.6. Overall, AMLP has seen a net outflow of $546.3 million since the beginning of the year, while AMJ has seen a net outflow of $2.0 million. AMLP’s higher YTD outflows indicate a shift in investors’ focus from equity-focused MLP funds to fixed income-focused MLP funds amid a rise in US Treasury yields. Next, we’ll discuss the top MLP losers last week.