Oil Price Alert: Oil Plunges, Bond Markets Vote America

February 5, 2010Statsweeper 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 $74.21per 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 beingbought. 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 baseremains 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 notablyfor the three-year note, dropping nearly 7% to 1.34% yield. This is the lowest yieldregistered since late December 2009.

Buying was also strong on the five-year note, which fell 4.6% to 2.29% yield. And theten-year, falling 2.9% to 3.62% yield.This contrasts with previous "flight to safety" buying of Treasuries, where purchaseswere 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. Butoverall 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 fewweeks. By contrast, two-, three- and five-year note yields appear to have brokenresistance, moving markedly lower than recent trading ranges yesterday.