Duration & Credit Pulse
Executive Summary
Key Developments: The government shutdown reached its 40th day, resulting in the suspension of major economic data releases. Treasury yields exhibited limited movement with the 10-year closing at 4.10%, up 2 basis points for the week. Credit spreads remain below historical averages, while alternative economic indicators present mixed signals. The Federal Reserve faces December policy decisions without complete economic data, with market-implied probability of a rate cut declining to 65%.
Duration Dashboard
| Maturity | Nov 2, 2025 | Nov 9, 2025 | Weekly Δ | 5-Year Percentile |
|---|---|---|---|---|
| 2‑Year | 3.58% | 3.56% | -1 bp | 39th %ile (middle range) |
| 5‑Year | 3.69% | 3.69% | 0 bp | 48th %ile (middle range) |
| 10‑Year | 4.08% | 4.10% | +2 bp | 63rd %ile (middle range) |
| 30‑Year | 4.65% | 4.70% | +5 bp | 84th %ile (elevated) |
Weekly Yield Curve Movement
Curve Analysis: The Treasury curve steepened modestly with the 2s30s spread widening to 114 basis points from 108bp the prior week. Short-end yields remained stable while longer-dated bonds increased marginally. The 30-year yield at the 84th percentile of its 5-year range indicates relatively elevated long-term rates. Trading volumes decreased approximately 40% from typical levels due to the absence of official economic data releases.
The government shutdown entered its 40th day on November 7, marking the longest federal closure in U.S. history. The Bureau of Labor Statistics has not released employment data for two consecutive months, removing a key input for market pricing. The 10-year Treasury yield's 2 basis point weekly increase to 4.10% represents limited movement given the uncertainty, remaining in the middle of its 5-year historical range at the 63rd percentile.
Credit Market Metrics
| Metric | Nov 2, 2025 | Nov 9, 2025 | Weekly Δ | 5-Year Percentile |
|---|---|---|---|---|
| IG OAS | 78 bp | 79 bp | +1 bp | 34th %ile (middle range) |
| HY OAS | 270 bp | 280 bp | +10 bp | 25th %ile (below average) |
| VIX Index | 17.44 | 19.08 | +1.64 | 56th %ile (middle range) |
Credit markets showed limited movement during the week, with investment grade spreads essentially unchanged at 79 basis points. High yield spreads widened 10 basis points to 280bp, remaining in the 25th percentile of their 5-year range. The VIX index increased to 19.08, indicating moderate equity volatility expectations. These spread levels remain below long-term historical averages despite the ongoing uncertainty from the government shutdown.
US Economic Data Assessment
The week of November 2-9 operated without official government economic statistics due to the ongoing shutdown. The Bureau of Labor Statistics, Census Bureau, and Bureau of Economic Analysis remain closed, eliminating standard data releases including employment reports, retail sales, and inflation metrics. Markets have relied on private sector indicators to assess economic conditions.
Private sector employment indicators: ADP reported 42,000 private sector jobs added in October, below consensus expectations of 100,000 and representing the weakest growth rate since 2020. Challenger, Gray & Christmas reported 153,074 announced layoffs in October, an increase of 183% year-over-year. Technology, retail, and financial services sectors accounted for the majority of announced reductions. Weekly initial jobless claims, which continue to be reported, came in at 221,000 for the week ending November 2.
ISM survey data: The Institute for Supply Management Services PMI registered 52.4 for October, above the 50.0 expansion threshold and exceeding expectations of 50.7. The Business Activity component rose to 54.3 while New Orders increased to 56.2. The Prices Paid index jumped to 70.0, its highest level since October 2022, suggesting persistent service sector inflation pressures.
Consumer sentiment indicators: The University of Michigan Consumer Sentiment Index fell to 50.3, the second-lowest reading in the survey's history. The Current Conditions component declined to 52.3, while one-year inflation expectations increased to 4.7%. The divergence between upper and lower income cohorts reached 30 points, indicating disparate economic experiences across income levels.
Federal Reserve Policy Considerations
The Federal Reserve approaches its December 17-18 meeting without two months of official employment and inflation data. Fed Governor Lisa Cook noted in her November 3 remarks that policy decisions will need to rely on available alternative indicators. The ISM Services Prices Paid component at 70.0 suggests continued inflation pressures in the service sector, which represents approximately 80% of economic activity.
Market pricing indicates a 65% probability of no rate change at the December meeting, down from 90% probability of a cut in early October. The absence of official data complicates the Committee's assessment of labor market conditions and inflation trajectory. Financial conditions remain accommodative with credit spreads near historical lows and equity markets near all-time highs, potentially reducing the urgency for additional easing.
Week Ahead: Key Events
- Government Funding Developments (Nov 11-15): Senate negotiations continue on bipartisan proposal to end shutdown. Resolution would trigger release of accumulated economic data.
- Federal Reserve Communications (Nov 11-15): Several Fed officials scheduled to speak before December blackout period begins December 7.
- Treasury Supply (Nov 12-14): $58 billion in 3/10/30-year auctions scheduled despite shutdown. Foreign demand remains key consideration.
- Alternative Economic Indicators: Markets will monitor ISM Manufacturing (previously reported at 48.7), weekly jobless claims, and high-frequency consumer data.
- Q3 Earnings Reports (Nov 12-15): Major retailers including Target, Walmart, and Home Depot report quarterly results, providing insight into consumer trends.
Market Positioning Analysis
Fixed income markets have demonstrated orderly trading despite the absence of traditional economic data inputs. The 10-year yield's limited 2 basis point weekly movement reflects both uncertainty and the lack of data catalysts. Record money market fund balances at $7.53 trillion indicate substantial cash on the sidelines awaiting deployment upon greater clarity.
Duration positioning considerations: The relatively steep yield curve with 2s30s at 114 basis points provides carry opportunities for duration extension. However, the 30-year yield at the 84th percentile of its 5-year range suggests limited room for further increases absent significant economic developments. Credit spreads at historically tight levels offer minimal compensation for risk, with investment grade at 79bp and high yield at 280bp both well below long-term averages. The disconnect between tight spreads and elevated economic uncertainty presents asymmetric risk. Resolution of the government shutdown will provide significant data flow that could alter current market pricing, particularly in credit markets where spreads appear insufficient given underlying fundamental conditions.
Weekly Market References
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Treasury Yields Stable as Economic Data Blackout ContinuesCNBCNovember 7, 2025Read Article
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Labor Market Assessment During Government ShutdownNPRNovember 7, 2025Read Article
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ISM Services PMI Report - October 2025ISM/PR NewswireNovember 5, 2025Read Article
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Consumer Sentiment Near Historic LowsCNBCNovember 7, 2025Read Article
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Treasury Borrowing Advisory Committee ReportU.S. Department of the TreasuryNovember 4, 2025Read Article
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Fed Governor Cook on December PolicyCNBCNovember 3, 2025Read Article
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Money Market Fund Assets ReportInvestment Company InstituteNovember 5, 2025Read Article
Frequently Asked Questions
How has the government shutdown affected Treasury market trading?
Trading volumes have declined approximately 40% from normal levels due to the absence of economic data releases. Despite the historic 40-day shutdown, Treasury yields have remained relatively stable, with the 10-year yield moving just 2 basis points for the week to 4.10%.
What explains the tight credit spreads given current uncertainty?
Investment grade spreads at 79bp and high yield at 280bp reflect market expectations that the shutdown will resolve without significant economic damage. These levels remain in the lower quartile of their 5-year ranges, suggesting limited risk premium despite the data vacuum.
How is the Federal Reserve approaching policy without economic data?
The Fed is relying on alternative indicators including ISM surveys showing 52.4 services PMI and private employment data from ADP reporting weak 42,000 job growth. Market pricing for a December rate cut has declined to 65% probability as the Committee awaits data clarity.
What happens when government data releases resume?
Markets will receive multiple months of delayed economic statistics simultaneously, likely creating volatility as algorithms and traders recalibrate positions. The sudden availability of employment, inflation, and growth data could significantly impact both rate and credit markets.
