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Shutdown Talks Lead To Smaller Weekly Yield Declines

Bond market yields ended the holiday-shortened week slightly lower across the curve after reversing even larger mid-week declines.  Thursday's commencement of new talks designed to end the shutdown gave bond yields a lift, but most bonds still ended the week lower by 3-4 bps.  The week's abbreviated economic calendar was mixed, as existing home sales declined notably in December while initial filings for state jobless claims fell below 200k for the first time in nearly 40 years.  It appears that furloughed government employees are not yet filing for jobless benefits, although that may change if the shutdown persists. 

As the shutdown extends further,  its impacts are becoming more measurable as economists lower estimates for first quarter GDP into the range of 1-2%.  Additionally, the US Treasury requires the suspension of the debt ceiling to be renewed by March 1, an unlikely occurrence while the government remains shut down.

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