Shutdown Day 2: Cracks Begin to Appear in the Markets 

If you think new all-time highs yesterday for both the Russell 2000 and Nasdaq suggest traders aren't worried about a shutdown, think again.

Cracks are beginning to appear elsewhere, most notably in 30-day T-Bills. These are generally perceived as the safest place to park money because they are so short-term and carry an implicit U.S. government guarantee. Look at what's happened to their yields in the last 48 hours...

Our own economics editor Mike McKee explains that investors are so concerned about getting their money back on time they are demanding higher rates. Legitimate concern or not, investors are worried furloughed workers won't be in place to supervise electronic transfers.

Meanwhile, foreign exchange dealers have already placed their bets. They've been selling dollars since July.

Two plain-worded notes from top FX strategists BBH's Marc Chandler and Citi's Valentin Marinov explain exactly what's happening:

Bottom line: The Swiss franc has proven incredibly resilient, a legitimate safe haven against both the U.S. dollar and the euro. The "Swissy" is quoted in number of Swiss francs per U.S. dollar, and the chart clearly show the dollar buys fewer francs than in July. We would also note the rate plummeted to 0.72 during the last debt crisis in 2011.

Stock traders may be comfortable with a shutdown... bond traders and FX dealers clearly are not.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.