Government shutdown may impact the economy, US bond yields fall to lows of the week.

On Friday, the prices of US treasuries rose as traders reacted to signs that the government shutdown may be weakening economic activity. Yields on treasury bonds of all maturities fell by at least 2 basis points, with long-dated bonds dropping by over 4 basis points. The yields on 10-year and 30-year treasuries both reached their lowest levels of the week. The shutdown began on October 1st, as the White House and Congress failed to reach a funding agreement. It is expected that an additional 2 million federal employees will be unable to receive their salaries next week, adding to the 250,000 already affected this week. Tomdi Galoma, managing director of Mischler Financial Group, stated: "The government shutdown is playing a key role in the market's expectations of a weakening economic outlook. The key is that this situation may continue for some time." Due to the government closure, the release of official economic data has been delayed. However, economists from Citigroup and Goldman Sachs indicated that state-level data showed an increase in initial jobless claims last week, strengthening market expectations of the Federal Reserve's second interest rate cut of the year on October 29th. Fed Governor Waller stated on Friday that, based on weak labor market conditions, he supports two more rate cuts this year. Other factors driving the rise in treasuries include the strength of the bond markets in the UK and France, the drop in oil prices to multi-month lows, and a favorable supply environment.