Government shutdown begins
Summary
Shutdown update
The government shutdown kicked off at 12:01 a.m. EDT on October 1, giving rise to uncertainty over how long it might drag on, which agencies will feel the brunt, and what the wider economic fallout could be.
The U.S. has weathered four shutdowns since 1990, with lengths ranging from five days all the way to 35. This time, the Congressional Budget Office estimates about 750,000 federal employees will be furloughed. Due to a 2019 law, these employees are guaranteed back pay once the government reopens, unless the situation escalates to the layoffs that President Trump has openly threatened. Economists warn that the shutdown could shave 0.1% to 0.2% off GDP, with the damage likely to climb the longer it lasts.
Leverage buyout activity
The Wall Street Journal reports that video game giant Electronic Arts (EA) is deep in negotiations to go private in a deal approaching $50 billion, a move that could mark the largest leveraged buyout in history.
Leveraged buyout activity has slowed since interest rates began rising in 2022, but is showing signs of recovery in 2025. In the first half of the year, 22 LBO transactions have been recorded, totaling over $150 billion (per Pitchbook). With the addition of the EA transaction, aggregate deal volume will exceed 2024 and will be the most active year for LBOs by volume since 2021.
The S&P 500 climbed 1.1% as signs of a cooling labor market lifted hopes for more interest rate cuts. Traders are still betting on a 25 basis point cut in October and another in December. Meanwhile, the yield on the 10-year Treasury slipped 7 basis points to 4.13%.
Is no data better than poor data?
A recent report from The Wall Street Journal discussed the reliability of BLS data, noting that reduced staffing and lower response rates from businesses have increased reliance on “imputation,” which uses adjacent field data to estimate missing information. The release of the September Jobs report from BLS, originally scheduled for last Friday, has been postponed due to the government shutdown.
Economists projected an increase of 50,000 jobs in September and a steady employment rate at 4.3%, but no official results have been released. In the interim, alternative reports have been provided: ADP reported a decrease of 32,000 private jobs in September, while Revelio Labs indicated an increase of 60,000 jobs, exceeding its forecast of 52,000. The S&P 500 showed minimal movement, and expectations for future interest rate cuts remained largely unchanged.
Government shutdown’s effect on commercial real estate
According to an analysis published last week by Marcus and Millichap, government shutdowns typically have limited direct effects on commercial real estate operations, as most tenants and property owners do not rely heavily on federal agencies. There are some exceptions, such as HUD subsidies for low-income renters, which may be postponed if a shutdown extends beyond 30 days. They expect financing to still be available through Freddie Mac and Fannie Mae. However, delays in the release of important economic data, including employment and CPI reports, can impact decision-making for businesses and investors. While immediate effects on commercial real estate are generally minor, extended shutdowns could influence consumer confidence, spending, and housing patterns, potentially affecting overall commercial real estate performance.
The week ahead
Earnings season begins in earnest next week, with investors closely monitoring reports for indications of economic growth, as well as the effects of inflation pass-through. Additionally, several speeches by Federal Reserve governors are scheduled. Canadian Prime Minister Mark Carney is set to meet with President Trump in Washington next Tuesday to address potential tariff relief on automotive and steel imports. Should the government shutdown conclude, the release of updated economic indicators may resume.
U.S. Treasuries
U.S. Treasuries indicate yields for on-the-run U.S. Treasury bills, notes, and bonds, which are typically the most recently auctioned and most liquid issue with a maturity closest to the stated tenor. These are commonly used for pricing fixed-rate debt at origination and for calculating yield maintenance.
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EURIBOR
EURIBOR is an interbank lending rate that is averaged from reports by a panel of banks seeking unsecured Euro-denominated loans in the short-term money market. The EURIBOR index is the adjustable interest rate referenced on approximately EUR 150 trillion of debt and derivatives.
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