Government shutdown is not a debt-ceiling crisis
The federal government shutdown is not the same as it reaching the debt limit.
The partial shutdown of the US federal government began Oct. 1, 2025. It is not the same as the Treasury Department's reaching the debt limit and therefore has vastly different implications for the US Treasury market.
A Government Shutdown
There have been several government shutdowns, most lasting only a very short time.
Why it happens
Congress must authorize funding (appropriations) for the current fiscal year and has been unable to come to an agreement
What it means
- Non-essential workers are furloughed, essential workers continue to perform their jobs but don’t get paid until the shutdown ends
- The issuance and repayment of US debt obligations are considered essential
- Congress may pass a short-term “continuing resolution” until more permanent appropriations can be approved
- Politically unpleasant and potential economic impacts but no significant market disruption expected
A Debt Ceiling Crisis
The US has never missed a debt payment but has been pushed to the brink in contentious times
Why it happens
Congress must take separate action to approve an increase in the outstanding level of public debt regardless of appropriations and has been unable to come to an agreement
What it means
- Treasury Department can operate with extraordinary measures and cash on hand
- Threat of a missed interest or principal payment when all resources have been exhausted
- Treasury can consider prioritization of payments or maturity extensions if forced to the edge
- Significant implications for Treasury market pricing and functioning should a missed payment occur. Heightens the probability of a rating agency downgrade