Everything the Market "Doesn't Want to Know" About the U.S. Government Shutdown
The risk of a U.S. government shutdown re-emerges, with Deutsche Bank revealing three major "hidden risks": first, economic growth is at the forefront, potentially dragging down GDP by 0.2 percentage points weekly; second, the interruption of key economic data releases could trap the Federal Reserve and the market in a decision-making "data black hole"; finally, the data vacuum could also have specific technical impacts on financial instruments such as Treasury Inflation-Protected Securities (TIPS). Fortunately, this deadlock does not involve the debt ceiling, avoiding systemic default risks
As the U.S. Congress once again falls into a budget impasse, a federal government shutdown seems imminent.
According to news from the Chase Trading Desk, a report released by Deutsche Bank on September 26 indicates that while this shutdown will not trigger the kind of imminent debt default panic seen in 2013, its direct drag on economic growth, interference with key economic data, and technical impacts on specific financial instruments constitute the "invisible risks" that investors truly need to be wary of.
The bank estimates that a comprehensive government shutdown in the U.S., if it leads to 800,000 federal employees being furloughed, would reduce quarterly annualized real GDP growth by approximately 0.2 percentage points each week. Meanwhile, the market and the Federal Reserve will face delays in the release of key economic data such as employment and CPI reports.
However, unlike in 2013, this impasse does not involve the debt ceiling issue. This means that investors do not need to worry about the systemic risk of a U.S. government "default."
"Data Black Hole": The Federal Reserve and Investors' "Blindfold Moment"
For market participants, the most immediate impact will be the delayed release of economic data. The report points out that if the government shuts down, employees of the Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) are likely to be furloughed.
This means that key data such as the highly anticipated employment report and the Consumer Price Index (CPI) will not be published on time. The report recalls the situation in 2013 when employment and CPI data for September and October were rescheduled, and the chaos in data releases continued until December of that year. Worse still, the Bureau of Labor Statistics admitted at that time that the sample size used to calculate the October 2013 CPI index was only 75% of the normal level.
For the Federal Open Market Committee (FOMC), which is set to hold a meeting on October 29, this is akin to "driving blindfolded." Deutsche Bank analysts believe that during this data vacuum, Federal Reserve officials will have to rely more on private sector data such as the ADP employment survey and weekly unemployment claims data at the state level to assess labor market conditions.
"0.2 Percentage Points Per Week": The Direct Drag on GDP
The economic cost of a government shutdown is clear and quantifiable. The report explains that the Bureau of Economic Analysis will account for the lost work hours of federal employees due to furloughs as a reduction in "federal government consumption expenditures," thereby directly lowering GDP.
The bank estimates that a comprehensive government shutdown leading to 800,000 federal employees being furloughed would reduce quarterly annualized real GDP growth by approximately 0.2 percentage points each week. For reference, the shutdown from October 1 to 16, 2013, led to a decline of $8 billion in annualized real federal consumption expenditures for that quarter, ultimately erasing 30 basis points (0.3%) from the 3.5% real GDP growth in the fourth quarter.
It is worth noting that the report mentions that even without a government shutdown, federal spending has already constituted an average drag of about 40 basis points on GDP growth for the first half of 2025. Therefore, any additional shutdowns will pose further downside risks to an already weak short-term growth outlook.
The Only Good News: No Default Risk This Time
Compared to the crisis in 2013 that held global markets in suspense, there is a fundamental difference in the current congressional deadlock. The report emphasizes that the current deadlock is limited to government appropriations and is not linked to the debt ceiling issue.
This means that investors do not have to face the risk of the U.S. government "defaulting" on its debt—something that was "a very real fear" in 2013. This key distinction significantly reduces the likelihood of this event evolving into a systemic financial crisis.
Wallstreetcn reported that Republican members of the U.S. House of Representatives recently unveiled a temporary spending bill aimed at avoiding a government shutdown on October 1, but the bill did not include the healthcare policies demanded by Democrats, leading to a standoff between the two parties.
Affected Financial Instruments: "Contingency Plans" for TIPS and Inflation Swaps
For fixed income and derivatives traders, the devil is in the details. The report elaborates on the specific impacts of the delayed CPI data on related financial instruments:
Treasury Inflation-Protected Securities (TIPS): If the CPI report for September is not released on time, the U.S. Treasury will calculate TIPS payment obligations based on an index derived from the most recent 12 months' available change rates, according to federal regulations. The report provides a specific calculation formula: the unadjusted CPI level for August 2025 (323.976) multiplied by the 12th root of the most recent annualized inflation rate (2.92%), resulting in a backup index of 324.753.
Inflation Swaps: According to the International Swaps and Derivatives Association (ISDA) guidelines, the treatment is slightly different. If the final data is released more than five business days before the payment date, actual data will still be used. Otherwise, the same backup method as related bonds will be adopted. In the absence of related bonds, the backup calculation will use the unadjusted CPI level for September 2024 (315.301) multiplied by the most recent annualized inflation rate (2.92%), resulting in a backup reading of 324.496.
These seemingly minor technical details will directly affect the valuation and cash flows of related positions.
The above content is from [Chasing Wind Trading Platform](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ)For more detailed interpretations, including real-time analysis and frontline research, please join the【 [Chasing Wind Trading Platform ▪ Annual Membership](https://wallstreetcn.com/shop/item/1000309)】[](https://wallstreetcn.com/shop/item/1000309)