Any House bill would still need to be reconciled with a Senate bill that would likely raise spending levels.

In the event McCarthy can't convince Freedom Caucus House Republicans to agree to a short-term 30-day continuing resolution (CR) to fund the government at last year's levels into the fall, Society Generale's head of US Rates Strategy, Subadra Rajappa, lays out what has happened in previous shutdowns - and what might be in store for investors.

Government shutdowns, while disruptive, have generally been short-lived affairs, averaging just 8.8 days. However, some outliers like those in 1995 and 2018, which extended beyond 20 days, suggest that the current political climate might again facilitate a more prolonged face-off.

So, when the feds turn off the lights - investors historically shuffle into front-end Treasuries as a safe haven, while yields and stocks tend to seesaw - guided by investors' anticipation of a deal. The front-end and belly of the US Treasury curve generally outperform the long end, providing some directional cues for traders. However, the data is not uniformly so, as the Treasury market is more nuanced.

The nature and eventual outcome of the budget negotiations may determine how Treasury bonds react. The moves in the long end of the UST curve have been varied during previous episodes. The 30y yield rose in the week preceding thirteen out of nineteen of the previous shutdowns. Some of the selloff in the long end over the past few months has likely been prompted by increased worries over rising deficits and increased privately-held UST supply.