Economically speaking, the partial government shutdown is a big nothingburger. GDP losses from this quarter — mostly through compensation to federal workers — will be made up next quarter.
But the debt ceiling is a whole other ballgame. A temporary “technical” default where debt payments are delayed would be a terrible outcome. The US not meeting its financial commitments whatever they are would be a terrible outcome. These are low risk probabilities, but Goldman Sachs thinks US Treasury investors are starting to worry:
The Treasury bill market is clearly indicating concern about upcoming debt ceiling deadlines (Exhibit 4). In our view this is the direct result of the increasing acrimony in Washington. Starting with the bill maturing on October 17―the day the Treasury Department has suggested it would exhaust its borrowing authority―bill rates are elevated, suggesting lower investor appetite for holding these securities. The distortion in the bill curve is most apparent in the security maturing on October 31, just after Treasury is likely to have depleted its cash balance. This unusual “humped” pattern is similar to that seen in late July 2011 during the last debt ceiling standoff.