Treasury bonds are having an excellent quarter, the best in 13 years. Higher bond prices have reduced their yield to only 3.41%. Some of the money used to buy bonds came from selling stocks which have had a very bad quarter, the Dow being down about 1K for the qtr. Today, Dow is up 58, NAZ up 13 but advancers are only slightly ahead of decliners. Markets are trying to evaluate the proposals to overhaul financial markets with more government regulation.
Merck (MRK), a Dow stock, and Schering-Plough (SGP) plunged on negative news about their anti cholesterol drug Vytorin. MRK is down 6 & SGP over 5.
The MLPs are yield securities & their yields are compared with Treasuries. Typically, a 200 basis point spread is expected. Last summer when the Treasury rate was near 5.2%, the spread narrowed to less than 50 basis points. Today after both yields went in different directions, the spread is over 300 points. There is also the 700 basis point spread between the yields on Treasury vs junk bonds. These differences spell opportunities.
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