<div id="readability-page-1"><div><div><div>Key points:<ul><li>U.S. equity indexes drop: S&amp;P 500 leads declines</li><li>Healthcare down most among S&amp;P sectors; energy leads gains</li><li>Euro STOXX 600 index falls ~0.7%</li><li>Dollar up; gold, crude slip; bitcoin down ~1.9%</li><li>U.S. 10-Year Treasury yield at 3-week high at ~4.20%</li></ul></div>US FUNDING BATTLE MAY BE KEY TO TREASURY MARKET DIRECTIONA battle in Washington to continue to fund the federal government may have large consequences for the U.S. Treasury market, as it will set the tone for next year's budget and the direction of the bond yields, according to FHN Financial.The U.S. “The shutdown fight and CR are only the first battle in the bigger 2026 budget war. This CR would extend funding through November, during which time Congress hopes to pass the necessary appropriations bills to make up the budget. Nevertheless, the CR will set the tone,” Chris Low, chief economist at FHN said in a report.“The budget fight is essential to the bond market,” Low said. “Wall Street is convinced Congress and the President will allow the budget to balloon again. If it does, long-term rates will rise. If Congress can keep the deficit from growing faster than GDP, long-term yields will likely drop. It really is that important.”Analysts at BMO Capital Markets, meanwhile, note that if a government shutdown postpones key economic releases including jobs data it could make it even more likely that the Federal Reserve cuts rates again next month.“Our sense is that embedded within the ~92% odds of a rate cut next month is the argument that a shutdown that leaves the Fed with an incomplete or distorted set of information on October 29th would make it increasingly difficult to justify not following-through with the quarter-point cut,” BMO analysts Vail Hartman and Ian Lyngen said in a note.The U.S. central bank last week cut rates for the first time since December and Fed policymakers indicated they expected rate cuts to follow in October and December.(Karen Brettell)*****EARLIER ON LIVE MARKETS:THURSDAY DATA DOWNPOUR: GDP, JOBLESS CLAIMS, DURABLE GOODS, ET AL CLICK HEREWALL STREET SLIDES FOR THIRD DAY AS RATE CUT BETS EASE CLICK HERERETAIL INVESTORS HOLD STEADY AS WALL STREET CLIMBS CLICK HERETHE AI INVESTMENT THEME: RISKS LOOM, BUT NOT A BUBBLE CLICK HERECITI ON EU AUTOS: 'NO SECTOR IS EVER UNINVESTABLE' CLICK HEREEUROPEAN SHARES SOFT, REMAIN IN NARROW RANGE CLICK HEREEUROPE BEFORE THE BELL: FUTURES STEADY, MARKETS AWAIT CATALYST CLICK HERESTOCKS TAKE A BREATHER CLICK HERE</div></div></div>

The ongoing funding battle in Washington is poised to significantly impact the U.S. Treasury market, influencing bond yields and the federal budget. FHN Financial's chief economist, Chris Low, emphasizes that the outcome of this funding extension will set the tone for future budget negotiations. Analysts at BMO Capital Markets warn that a government shutdown could delay crucial economic data, potentially leading the Federal Reserve to cut rates again next month. Currently, the U.S. 10-Year Treasury yield is at a three-week high of approximately 4.20%.

US funding battle may be key to Treasury market direction