The U.S. Treasury said Wednesday it will invoke emergency backup procedures for the first time to set inflation adjustments for billions of dollars in government bonds after the longest federal shutdown in history blocked the release of October consumer price data.
With the Bureau of Labor Statistics unable to publish the October Consumer Price Index because of the 43-day funding lapse that ended on November 12, Treasury assigned a provisional index value of 325.604 for the month. That figure, calculated under rarely used contingency rules, will be used to determine payments on Treasury Inflation-Protected Securities (TIPS) even if official CPI numbers are later released.
The move affects the $2 trillion TIPS market, where principal and interest automatically rise with inflation, as well as a separate $4.5 trillion universe of inflation derivatives that will rely on a slightly different fallback formula.
“Even before the announcement, it was widely expected that the fallback would apply for October, so markets had already priced it in,” Jon Hill, head of U.S. inflation strategy at Barclays Capital Inc, said, according to Trade Algo.
The shutdown prevented BLS field staff from collecting price data from roughly 80,000 items nationwide, forcing the agency to cancel both the October CPI and unemployment reports entirely — a first in the history of government closures.
Treasury’s synthetic index assumes inflation continued at the same 12-month pace recorded from September 2024 to September 2025. Inflation swaps, governed by different industry rules, will use a separate calculation that produces a marginally lower October value of 325.174.
The discrepancy has already widened the gap between short-dated TIPS and related derivatives in recent weeks as traders positioned for the contingency trigger.
The Federal Reserve, which has cut interest rates twice this year, will now enter its December 9-10 policy meeting without fresh inflation data beyond September. Several officials have cited the information vacuum as another reason to pause further easing while price pressures remain above the 2% target.
BLS said it will fold whatever October components it can recover into the November CPI, still scheduled for release on December 18.