Here’s everything the market “doesn’t want to know” about a U.S. government shutdown.

```

As the U.S. Congress once again falls into a budget deadlock, a federal government shutdown seems imminent.

According to Chase Wind Trading Desk, a report released by Deutsche Bank on September 26 shows that although this shutdown may not trigger debt default fears like those in 2013, its direct drag on economic growth, its disruption to critical economic data, and its technical effects on certain financial instruments constitute the "hidden risks" that investors truly need to heed.

The bank estimates that a full federal government shutdown that puts 800,000 federal employees on furlough would lower quarterly annualized real GDP growth by about 0.2 percentage points per week. The market and the Federal Reserve will also have to deal with delayed releases of key economic data such as the employment and CPI reports.

However, unlike 2013, this deadlock does not involve the debt ceiling issue. This means investors do not need to worry about the systemic risk of a "default" by the U.S. government.

"Data Black Hole": The Federal Reserve and Investors' "Blindfolded Moment"

For market participants, the most direct impact will be the delayed release of economic data. The report points out that if there is a government shutdown, 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 Consumer Price Index (CPI) will not be released on time. The report reviews the situation in 2013, when the employment and CPI data for September and October were rescheduled; the confusion in data releases lasted through December of that year. Worse still, the BLS admitted at the time that the sample size used to calculate the October 2013 CPI was only 75% of the usual level.

For the Federal Reserve (FOMC), which is scheduled to meet on October 29, this is akin to "driving blindfolded." Deutsche Bank analysts believe that during this data vacuum, Fed officials will have to rely more on private sector data such as ADP employment surveys and state-level weekly jobless claims to assess labor market conditions.

"0.2 Percentage Points Per Week": The Direct Drag on GDP

The economic cost of a government shutdown is explicit and quantifiable. The report explains that the BEA would classify the work time lost by furloughed federal employees as a reduction in "federal government consumption expenditure," directly reducing GDP.

The bank estimates that a full government shutdown affecting 800,000 federal workers would decrease quarterly annualized real GDP growth by about 0.2 percentage points per week. For reference, the shutdown from October 1 to 16, 2013, caused an $8 billion (annualized) reduction in real federal consumption expenditure for that quarter, eventually shaving 30 basis points (0.3%) off the 3.5% real GDP growth in Q4.

Notably, the report mentions that even without a shutdown, federal government spending has already been a drag of about 40 basis points on GDP growth in the first half of 2025 on average. Therefore, any additional shutdown will further increase the downside risks for an already weak near-term growth outlook.

The Only Good News: No Default Risk This Time

Compared with the 2013 crisis that made global markets hold their breath, there is a fundamental difference this time. The report emphasizes that the current deadlock is limited to government appropriations and is not linked to the debt ceiling.

This means investors do not face the risk of the U.S. government "defaulting" on its debt—a "very real fear" back in 2013. This crucial distinction greatly reduces the possibility of this event developing into a systemic financial crisis.

Wall Street Journal wrote that recently Republican members of the U.S. House of Representatives unveiled a temporary spending bill aimed at avoiding a federal government shutdown on October 1, but the bill does not include the healthcare policies demanded by Democrats, putting both parties in opposition.

Financial Instruments Affected: “Contingency Plans” for TIPS and Inflation Swaps

For fixed-income and derivatives traders, the devil is in the details. The report details the specific impacts of CPI data delays on related financial instruments:

Treasury Inflation-Protected Securities (TIPS): If the September CPI report is not released on time, the U.S. Treasury, according to federal regulations, will use an index based on the most recent 12-month available change rate to calculate TIPS payments. The report provides a specific calculation formula: take the unadjusted CPI for August 2025 (323.976), multiply by the 12th root of the most recent annualized inflation rate (2.92%), and the backup index comes to 324.753.
Inflation Swaps: According to International Swaps and Derivatives Association (ISDA) guidelines, the approach is somewhat different. If the final data is released more than five business days before the payment date, the actual data will still be used. Otherwise, the same backup method as the related bonds will be used. If there is no related bond, the backup calculation will use the unadjusted CPI for September 2024 (315.301) multiplied by the most recent annualized inflation rate (2.92%), resulting in a backup figure of 324.496.

And these seemingly minor technical details will directly affect the valuation and cash flows of related positions.

~~~~~~~~~~~~~~~~~~~~~~~~

The above exciting content comes from Chase Wind Trading Desk.

For more detailed interpretation, including real-time analysis and frontline research, please join the 【Chase Wind Trading Desk·Annual Membership】

Risk Warning and DisclaimerMarkets have risks, investment requires caution. This article does not constitute personal investment advice, nor does it take into account the individual investment objectives, financial circumstances, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Any investment made is at your own risk. ```