Treasury Yields Stay Quiet As Shutdown Stalls Market Moves

What’s going on here?

After Congress missed its September 30 funding deadline, the US government went into shutdown, freezing key economic reports and putting investors in a holding pattern.

What does this mean?

With official economic updates on ice, financial markets are flying blind. Both 2-year and 10-year Treasury yields barely budged, as news flow slowed to a trickle. Yet, a recent $22 billion 30-year bond auction attracted record demand, showing investors are still keen on safety despite the uncertainty. Experts caution that without reliable data, the normal signals from the bond market are harder to interpret. So investors are looking to alternative data, like the University of Michigan consumer sentiment report, to fill the gap. Meanwhile, the Federal Reserve has signaled a possible rate cut, but officials warn that persistent inflation may keep them cautious for now.

Why should I care?

For markets: Markets tread water amid the data drought.

With the government shutdown choking off new economic data, bond markets are left guessing at the Fed’s next move. The yield curve has steepened slightly, indicating traders expect easier policy on the horizon. Futures suggest a strong chance the central bank will cut rates soon, but until data returns to normal, investors are reluctant to make bold moves. That means trading could stay muted, and uncertainty may linger until Washington gets back to work.

The bigger picture: Uncertainty clouds the outlook for everyone.

The shutdown underscores how dependent global markets are on steady flows of US economic data. Without it, decision-makers from corporations to governments are left navigating in the dark. Since US policies have outsized influence worldwide, any misstep – or delay – here can cause ripples across emerging markets, currencies, and financing costs. For now, everyone is keeping a close eye on any signal that can help fill the information gap.