NEW YORK (TheStreet) -- The second day of the U.S. government shutdown on Wednesday brought more volatility to markets than the day before.
Trading began in the New York session with a strong selling in the U.S. dollar, large buying in the long-dated Treasury bond and quick drops in equity indices.
Although lasting macro consequences such as default on Treasury debt are unlikely, the polarization in Washington reveals troubling truths. A nation with a government unable to accomplish even the smallest of tasks doesn't bode well for the fiscal or monetary future of that country.
The global economy is on a gradual path to recovery, with some overhead resistance from structural issues. The introduction of an avoidable geopolitical risk complicates things further.The first chart below is of iShares Barclays 20+ Year Treasury Bond (TLT). The long-dated Treasury bond is in an upward trend for various reasons. The Federal Reserve's commitment to buying Treasuries is a main one, while the political issues in Washington are also aiding in the move higher. The debt has been a safe-haven place to invest funds, and as was seen Tuesday, large bids can flow in quickly when investor fear spikes.
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