With less than 10 hours left until the federal budget deadline and no deal in sight, a government shutdown now looks imminent. Federal agencies have already prepared to close up shop. But questions remain about what kind of impact it would have and how disruptive it will be to your life. American public. A shutdown might impact the trading volatility since it means the release of certain economic indicators would stop. However, the shutdown would NOT have any affect on tax collection, Treasury issuance, debt interest payments or existing social security beneficiaries. In the end, it is the White House that determines which agencies and functions will ultimately be deemed essential in a shutdown this year. The immediate concern is continuing funding for the current year and the beneficiaries of those funds. If the shutdown in 95-96 is any guide (although we all know past performance is not indicative of any future results) the economic and market impacts of a shutdown likely will be negligible.
According to Rudy Narvas, In the first three months of the stand-off, markets felt that the dispute would resolve itself out and there were some reports of Treasuries rallying during the December shutdown on speculation of a compromise. In the second half, optimism may have faded, but there was still very little reaction to debt crisis news, such as a downgrade warning issued by Moody’s. Today, markets may be more distracted by other events such as Fed policy and the current dislocation in repo markets caused by the Dodd- Frank legislation.
Source: Cluster Stock