How shutdowns impact stocks and bonds

Group 1 - A government shutdown occurs when Congress fails to pass a budget or a short-term funding solution, leading to a temporary lapse in funding while essential services continue to operate [1][2] - The impact of a shutdown includes delays in federal permits, loan approvals, and data releases such as the monthly jobs report, but it does not equate to a government default on debt [2][3] - Historical data shows that during the 11 US shutdowns since 1980, stock market reactions tend to be muted in the short term, with median returns remaining small until about a month after the shutdown [4][5] Group 2 - The US 10-year Treasury note yield does not show significant changes immediately before or after a shutdown, but typically experiences a median drop of 19 basis points one month after the shutdown begins [7][9] - Short-term interest rates exhibit mixed movements around the time of a shutdown, but tend to decrease about two-thirds of the time one year later, with a median drop of 39 basis points [9][10] - The length of a shutdown can negatively impact growth expectations and lead to lower long-term rates, while delays in data releases can cause markets to rely more on alternative data sources [11][12]