February 5, 2010.
Statsweeper registered alerts across the entire WTI oil futures complex yesterday.
Prices fell dramatically, with all six of the nearest contracts down over 5%. Four-month futures took the biggest percentage dive, dropping 5.6% from $78.60 to $74.21 per barrel.
Front-month futures fell 5.1%, from $77 to $73.06.
As widely reported, the fall in WTI was part of a larger sell-off in commodities. Triggered by strengthening of the U.S. dollar.
With all the focus on yesterday's selling, there was less press on the things being bought. Most notably U.S. Treasury notes.
Alerts registered for falling yields on three-, five- and ten-year Treasury securities. Yields plunged as traders piled into these investments, driving up prices.
This is significant. Many analysts recently predicted investors would shun U.S. government debt as America's deficit spending rises and the nation's monetary base remains ballooned by more than $1 trillion compared to just 18 months ago.
But it appears when the markets get shaky, buyers still see U.S. bonds as the safe-haven investment of choice.
Particularly interesting was investors' choice of Treasuries. Yields fell most notably for the three-year note, dropping nearly 7% to 1.34% yield. This is the lowest yield registered since late December 2009.
Buying was also strong on the five-year note, which fell 4.6% to 2.29% yield. And the ten-year, falling 2.9% to 3.62% yield.
This contrasts with previous "flight to safety" buying of Treasuries, where purchases were focused on short-dated notes and bills. Often with maturities of 52 weeks or less.
Bill yields did fall yesterday. With the 52-week bill down 12.1% to 0.29% yield. But overall buying of these securities hasn't been as strong as might be anticipated.
52-week bills are still trading in the same range that's prevailed over the last few weeks. By contrast, two-, three- and five-year note yields appear to have broken resistance, moving markedly lower than recent trading ranges yesterday.
If this trend continues, it suggest investors are willing to lock in their money with the U.S. government for longer periods than they were previously comfortable with. A big vote of confidence for America and the U.S. dollar.
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By. Dave Forest of Notela Resources