Bettors are giving an 83% chance of a shutdown, suggesting it will occur at midnight on Wednesday, September 30. The biggest FINANCIAL MARKET impact from a shutdown is the suspension of government-released economic data. In the current case, no economic data will be released starting Wednesday morning, which would include the September unemployment rate/payroll report due on Friday morning, October 3, should it last this long. Yes, a government shutdown matters for many things unrelated to financial markets, but its INITIAL impact on security prices or exchange rates should be negligible. However, this impact can become significant if the shutdown persists for an extended period, accumulating the delays in statistical reports, which further muddies the economic outlook. Note that the longest government shutdown was 35 days from December 2018 to January 2019 (Trump 1.0). --- What is a shutdown? Congress must pass a budget or a continuing resolution to keep the government funded. If no such agreement is reached by the date the previous budget or continuing resolution ends (in this case, September 30, the end of the government's fiscal year), the government shuts down. However, the rules stipulate that essential government services, such as air traffic control, the military, and payment of interest on government debt, will continue. Government operations deemed "nonessential" will shut down, including the Bureau of Labor Statistics (BLS) and other government statistical agencies. This means no government reports will be released during the shutdown. In theory, government shutdowns are BULLISH for the bond market, as they CAN BE draconian ways to reduce the deficit. In reality, they are rarely bullish, as the agreement to reopen the government (agreeing to a budget or continuing resolution) includes paying salaries and government services that were not provided during the shutdown. Therefore, the most significant market impact is the potential disruption resulting from not receiving timely economic reports. Contrast this to the similar debt ceiling "x-date." This occurs after the debt ceiling is reached because Congress and the President cannot agree on an increase, and the Treasury Department exhausts its extraordinary measures to keep the government funded. When this happens, the government starts to shut down, including the suspension of interest payments on the debt, which is otherwise known as a technical default. This makes it a major market event, bearish for the bond market. Do not confuse a potential government shutdown that allows interest on debt to continue to be paid with a debt ceiling x-date, which does not.(Jim Bianco)