Last week the average price for regular gasoline in the United Sates rose to $1.94 per gallon, up 2.55 cents, or 1.3%, in the two weeks that ended February 20th. Additionally, oil inventories fell 138,000 barrels to 350.6 million barrels last week; the first decline for 2009 suggesting that demand both domestically and internationally is finally perking up.

As crude oil shows signs of bottoming, oil refiners such as Valero Energy (VLO) and Marathon Oil (MRO) are positioned to capture wider crack-spread margins as a result of slightly higher prices. A crack spread margin is a rate, or spread, in which it takes the refiners, such as Valero and Marathon to buy the raw crude oil, process it, and turn it into sellable gasoline to gas stations.

On Thursday, five-year Credit Default Swaps on the United States reached a historic high of 100 basis points, this compares to just 30 basis points reached on September 30th 2008. Given credit default swap spreads on France, Japan, and Germany are trading in the mid-90basis point range, suggesting that these nations are considered relatively safer than even the United States. Essentially, a credit default swap is an insurance policy against a specific firm, or even country defaulting on ten-million dollars worth of bonds. Generally speaking, higher credit default swap spreads are associated with financial stress, liquidity concerns, and overall negative investor sentiment on the underlying entity.

What is particularly interesting here, is the fact that while five-year CDS spreads on the United States government did indeed hit a record high, the thirty-year bond issued by the United States government is trading with a record low yield, and well above its par-vale—hinting that investors are ‘flocking’ to the safety of the thirty-year, commonly referred to as the ‘long-bond’ as economic conditions across the world deteriorate substantially. What makes this conundrum between the thirty-year bond and CDS spreads on the United States fascinating is why would investors would flock in mass to the thirty-year bond trading at $120.24 with a coupon yield of 3.375% when they are guaranteed to lose money (par-value is $100) excluding the coupon yield and factoring ‘normalized’ inflation on the order of 2% per year, as Federal Reserve Chairman Ben Bernanke suggested just this week. Furthermore, with CDS spreads hitting a record high, yields on the thirty-year, which is backed by the United States government should be substantially higher and the price of the thirty closer to its inherent par-vale to reflect the credit worthiness of the U.S government.

Take for example General Motors (GM) whose credit default swaps are trading north of $1,500,000 per year for protection---these levels are extremely distressed and suggest a default is imminent.

On Friday Astellas Pharma, Japan’s second-biggest drug maker, took its $1billion dollar cash bid for CV Therapeutics directly to CV Therapeutics shareholders after failing to research a friendly agreement over the last three months. Astellas Pharma offer is for $16 in cash for each CV Therapeutics share. Recently, shares of CV Therapeutics were trading at $15.86 suggesting investors feel Astellas will be forced to re-bid at a higher price.

This tender offer is exceptionally similar to Roche’s $86.50tender offer for shares of Genentech (DNA). Currently shares of Genentech are trading at $87.48 suggesting that few if any investors will tender their shares to Roche at a below market-value price. Recently, Roche just completed offers for fixed and floating rate bonds totaling $16.5 billion dollars, suggesting so some that the firm will likely bid higher than $42 billion dollars for the 44% of Genentech it does not already own.