Core Viewpoint - The ongoing U.S. government shutdown is pushing financial markets towards a dangerous edge, but there are signs of potential breakthroughs in negotiations between the two parties in Congress [1][2]. Group 1: Impact of Government Shutdown - The U.S. federal government shutdown has entered its 36th day, breaking the previous record of 35 days from late 2018 to early 2019, making it the longest shutdown in U.S. history [3]. - The Congressional Budget Office estimates that the prolonged shutdown could lead to a decline in the annual GDP growth rate by 1 to 2 percentage points in Q4 of this year, with the BBC estimating a loss of approximately $15 billion for the U.S. GDP for each week the shutdown continues [4]. - The shutdown is causing significant liquidity issues in the financial markets, with effects comparable to multiple interest rate hikes [5]. Group 2: Political Developments - There are emerging signs of a potential resolution in Washington, with Senate Majority Leader John Thune proposing a solution that combines a short-term funding bill with a vote on extending subsidies for the Affordable Care Act (ACA) [6]. - Some Republican lawmakers express optimism about reaching an agreement this week, with Senator Markwayne Mullin indicating confidence that a deal could be finalized as early as Wednesday night or more likely by Thursday [7]. Group 3: Liquidity Crisis - The shutdown has led to a significant liquidity crisis, with the U.S. Treasury's General Account (TGA) balance increasing from approximately $300 billion to over $1 trillion in the past three months, effectively withdrawing over $700 billion from the market [8]. - Key financing rates are under pressure, with the Secured Overnight Financing Rate (SOFR) spiking 22 basis points, indicating that actual financing costs have not decreased despite the Federal Reserve's rate cuts [8]. Group 4: Negotiation Challenges - Despite the potential for a breakthrough, there are significant divisions within the Democratic Party regarding the proposed compromise, with moderate Democrats considering a temporary funding bill in exchange for future commitments on ACA subsidies [12][13]. - Progressive Democrats are opposed to this approach, viewing it as a betrayal of working families, while former President Trump is pressuring Republicans to eliminate the Senate's filibuster rule, adding complexity to the negotiations [14].