Markets Unfazed as US Government Shutdown Begins

• The US government shutdown officially began overnight, though markets have so far taken it in stride with little immediate reaction showing up in risk assets.
• Economic data was softer, with ADP private payrolls unexpectedly declining by 32,000 in September (vs expectations of a 51,000 gain), adding to signs that labour market momentum is cooling.
• Bond markets responded with lower yields: the 10yr Treasury eased 5bp to 4.10%, while the 2yr shed 6bp to 3.54%, reflecting the weaker jobs backdrop.
• Futures markets are now assigning a 95% probability of a 25bp Fed cut at the 30 October meeting, with the funds rate currently sitting around 4.125% (mid).
• Domestically, today is a busy one for data with household spending, the RBA’s Financial Stability Review, and August trade balance figures will all provide fresh colour on the local economic pulse.