The U.S. 10-year Treasury yield slipped to 4% on Wednesday, approaching its lowest point since April, after Federal Reserve Chair Jerome Powell signaled growing concerns over labor market weakness and hinted at further interest rate cuts.
The prolonged U.S. government shutdown, now in its 15th day, has disrupted data releases and increased uncertainty, prompting investors to seek safety in Treasuries and other risk-free assets.
According to Wells Fargo, the economic and financial market impact of the shutdown has so far been muted, but the extended impasse could pose wider risks if it continues. Approximately 600,000 federal employees have been furloughed without pay, while another 1.7 million continue working without immediate compensation.
Markets have now fully priced in at least one 25-basis-point rate cut this month, with additional cuts expected in December and three more projected for 2026.
Before the shutdown, Wells Fargo anticipated a 25bps reduction at the next Federal Open Market Committee (FOMC) meeting scheduled for October 29–30. However, the bank now believes the prolonged shutdown makes another rate cut in the coming weeks even more likely.
“Although the shutdown’s direct economic effect remains limited, it clearly represents a drag on momentum rather than a boost,” the report said.
Bond yields were also pressured by renewed U.S.-China tensions, after President Donald Trump threatened Beijing with a cooking oil embargo in retaliation for China’s soybean import restrictions — further fueling investor demand for safe assets.
In Congress, efforts to resolve the standoff remain gridlocked. The House of Representatives passed a Republican-led continuing resolution (CR) on September 19 to fund the government through November, but the bill has stalled in the Senate, where Democrats have opposed it. A filibuster-ending vote requires 60 votes, and bipartisan consensus has yet to emerge.
With no resolution in sight, the U.S. faces growing economic uncertainty, with analysts warning that prolonged fiscal deadlock could dampen consumer and business confidence as well as delay critical data-driven policymaking.
