A Real Quick Take On What The Shutdown Is Doing To The Economy And Interest Rates

We estimate a one-tenth reduction in Q4 GDP for each week of the shutdown initially, but a dragged shutdown into third week could intensify the reduction toward two-tenths. Our estimate for ADP's employment number, which is a reasonable proxy for BLS payroll data in the last one year, is +170k, the same as our forecast for private payrolls. Uncertainty of the government shutdown should provide a short term tailwind to a consolidation of the summer's sell-off. We remain comfortable with our y/e forecast for 2.5% 10y, but a more acute scare in the budget and debt ceiling process could push yields even lower in the short run.