What is shut down during the shutdown?

Funny enough, it is different during every shutdown what is funded and what is deemed essential. The IRS is open during this shutdown, at least for now. The IRS is tapping into funds set aside as part of the 2022 Inflation Reduction Act, and will stay open for an additional five business days. After that it’s anyone’s guess, at least at the moment. The biggest issue currently is that the data reporting will stop.

Markets seem to be taking the shutdown in stride for the moment.

Bonds are trending positive, so rates are a little improved. It is unlikely Congress will get anything done this early in the standoff other than continue to look foolish. It is just asinine that this is where we are. Nothing good happens from this shutdown, and the political capital everyone is trying to accumulate by being petulant is more likely to backfire and cost them voters, especially when people don’t get paychecks or, worse, get fired. Employment is already cracking as we continue to see in each week’s numbers.

This shutdown can go on for a long time, and the democrats are in a weaker position with more to lose. The best deal is often the first deal. The president is playing Chess the Dems, Checkers. For now, the shutdown is having just a small effect on bonds, but that is likely to grow as time goes on without a deal. The longer the shutdown, the more likely it is to affect the economy and markets will take more notice.

🏦 Mortgage Market & Rate Analysis
Monday, September 29, 2025

📊 Economic Data Highlights (This Week):

ADP Payrolls (Oct 1):
- -32K jobs (vs. +51K expected). First contraction since COVID. August revised from +54K to -3K.
ISM Manufacturing PMI (Oct 1):
- 49.1 (expected 49.0). Still in contraction territory.
Consumer Confidence (Sept 30):
- 94.2 (vs. 96.0 expected). Reflects growing economic anxiety.
Chicago PMI (Sept 30):
- 40.6 (vs. 43.0 expected). Deep contraction in regional manufacturing.
PCE Inflation (Sept 26):
- Core PCE +0.2% MoM. Inflation sticky but not accelerating.
GDP Revision (Sept 25):
- Revised Q2 3.8% (vs. 3.3% expected). Stronger, but forward momentum slowing.

📰 Labor Market & Confidence:

JOLTS report shows job openings flat in August, vacancy rate at a cycle low of 4.3%.
Hiring demand softens, easing wage pressures; quit rate falls, raising layoff concerns.
Consumer confidence fell to a five-month low in September — second straight month where unemployed workers slightly exceed job openings.

📉 Market Snapshot:

MBS: FNMA 30YR 5.5 up 17 bps → modest improvement in mortgage pricing.
10-Year Treasury Yield: 4.12% (down 4 bps).
- Reflects investor caution amid weak labor data and political uncertainty.

🏛 Political Developments:

Government Shutdown: Partial shutdown underway. Biggest issue: data releases delayed (BLS jobs report).
Supreme Court & Fed Independence: Court blocked President Trump’s attempt to remove Fed Governor Lisa Cook. Fed autonomy preserved for now, but political pressure likely to grow before October FOMC.

🔮 Rate Forecast & Market Expectations:

Short-Term (October): Weak ADP/manufacturing data strengthen odds for a Fed cut Oct 28–29. Markets pricing in two cuts by year-end; one member even pushing for 50 bps.
Medium-Term (Q4 2025): If jobs weaken + inflation subdued, mortgage rates may drift toward 6.25%–6.5%.
Housing Market: Mortgage apps down 12.7% last week; refis plunged 20.6%. Lower rates could revive demand into the holidays.

💡 Advice for Borrowers:

Rate Locks: With volatility high, lock now if closing within 30 days.
Refinancing: Rates dipping below 6.25% → worth a refi check.
First-Time Buyers: Stay patient. Post-FOMC dips may create good entry opportunities.

Stay safe and make today great!