Business
Why the US government has shut down and what happens now
Anthony ZurcherNorth America correspondent and
James FitzGerald
Funding for the US government has been cut off after President Donald Trump’s Republican Party failed to agree with opposition Democrats on a way forward on a spending bill.
The news means that some – but not all – US government services will come to a temporary halt.
Although budget confrontations are common in US politics, this spending fight is especially tense because Trump has spent the last nine months drastically cutting the size of the national government.
Why has the US government shut down?
This situation results from the inability of the two parties to come together and pass a bill funding government services into October and beyond.
The Republicans control both chambers of Congress, but in the Senate – or upper chamber – they are short of the 60 votes they need to pass a spending bill.
Democrats, therefore, have some leverage in this case. They refuse to back a Republican bill, saying it will make it harder for Americans to afford healthcare, and have made this standoff primarily about advancing their healthcare policy goals.
They are calling for an extension of tax credits that make health insurance cheaper for millions of Americans – which are set to expire – and for a reversal of cuts to Medicaid that have been made by Trump. Democrats also oppose spending cuts to the Centers for Disease Control (CDC) and National Institutes of Health (NIH).
A stopgap bill was earlier passed in the House, or lower chamber, but is yet to clear the Senate.
When did the shutdown happen?
At 00:01 EDT on Wednesday (04:01 GMT), it became official: the US would have its first shutdown for nearly seven years.
The last time this happened was at the end of 2018, during Trump’s first term. Both sides made last-ditch efforts to avoid a repeat this time.
On Monday, Trump met all four congressional leaders – the top Democrats in the House and Senate as well as their Republican counterparts. But there was little progress, and both sides appear to have dug deeper into their positions.
On the Republican side, Trump administration officials have been unwilling, so far, to offer any substantive concessions.
They appear to believe Democrats, as the side making demands in exchange for keeping the government open, will bear the brunt of the public’s blame – as they have in some past shutdowns.
Democrats, meanwhile, believe their push for preserving health-insurance subsidies is a popular one.
What is more, their congressional leaders provoked the ire of left-wing activists for backing down during the last budget bout in March. Many Democrats are itching for a bigger fight this time around – and funding the government is one of the only places where their party has some leverage.
What’s different about the White House response this time?
What stands out about this current standoff is the position of Trump’s team.
In the past, long shutdowns were usually seen as politically dangerous, hampering both voters’ everyday lives and the images of lawmakers and the president.
But this time around, the Trump administration appears more than happy to shutter large parts of the US government for an extended period. In fact, officials have threatened to use a shutdown to identify “non-essential” workers who could then be permanently let go.
“We’ll be laying off a lot of people,” Trump said on Tuesday.
Also, after previous shutdowns, government operations mostly returned to normal, with staff and spending levels largely going back to what they had been before, once the standoff was resolved.
Over the past nine months, however, the Trump administration has slashed spending and pushed workers out of their jobs, testing the boundaries of presidential power. A shutdown could allow the administration to accelerate its massive reductions.
What impacts will the shutdown have – including on national parks and social security?
Not all of government will shut down.
Border protection, in-hospital medical care, law enforcement and air-traffic control are expected to continue to operate during the stoppage.
While social security and Medicare cheques would still be sent out, benefit verification and card issuance could stop.
Generally, in a shutdown, essential workers continue as normal – some of them without pay for the time being – but government employees deemed non-essential are temporarily put on unpaid leave. In the past, these workers have then been paid retrospectively.
That means that services like the food assistance programme, federally-funded pre-school, the issuing of student loans, food inspections, and operations at national parks are expected to be curtailed or closed.
There could also be travel delays if the stand-off drags on and unpaid workers stop showing up.
Overall, analysts expect that this shutdown could be bigger than the one in late 2018, when Congress had passed some funding bills. They expect roughly 40% of federal workers – more than 800,000 people – to be put on temporary leave.
How could this shutdown affect the economy?
The scale of the damage will depend in part on how long the shutdown lasts – and how wide ranging it is.
In the past, disruption has tended to be temporary, with any lost activity mostly made up in the months after the shutdown ends.
Analysts estimate a shutdown this time could shave roughly 0.1 to 0.2 percentage points off economic growth for each week that it lasts – though much of that could be recouped.
That relatively muted impact may be why the stock market seems to be shrugging off this latest threat.
But, again, there are some ways that this shutdown could look different.
For one thing, Trump has threatened to fire – not just furlough – some workers, which would make the impact more long lasting.
The fight is also injecting more turmoil into an economy already being roiled by changes like tariffs and artificial intelligence, with the likely delay of key data – such as the official US monthly jobs report – expected to add to the uncertainty.
How common are shutdowns in the US?
Quite common over the past 50 years.
There were three during Trump’s first term, including the longest in history at 36 days, which ended in January 2019. That one was brought about by disagreements over funding a wall on the Mexico border.
The Congressional Budget Office (CBO) estimated that it reduced economic output by about $11bn, including $3bn that it never regained.
Fellow Republican Ronald Reagan oversaw eight shutdowns during his presidency in the 1980s – though all were relatively brief.
Shutdowns over budgets are almost unique to US politics.
Under the US system, the different branches of government have to reach an agreement on spending plans before they can become law.
In most countries, budget votes become votes of confidence in the government itself. But because the US has equal and often divided branches of government, that is not the case.
The London Stock Exchange Group has unveiled plans for a £3 billion share buyback amid pressure from an activist investor and as artificial intelligence fears have hammered the stock.
LSEG said it would follow £2.1 billion in buybacks made last year with another £3 billion by February next year, on top of a hike in dividend payouts.
Details of the pledge to step up returns for investors came as it reported underlying operating profits of £3.51 billion for 2025, up 10.8% or 14.7% higher on a constant currency basis.
On a bottom line basis, pre-tax profits jumped 56.5% to £1.97 billion for 2025.
Shares in the group rose as much as 5% in Thursday morning trading, in a welcome increase after the stock has been battered in recent weeks by global investor concerns over the impact of AI on its firm and data companies more widely.
Shares in the firm, which makes a significant chunk of its earnings from selling access to markets data, have slumped by nearly a third in the past year.
Activist investor Elliott Management has also built up a stake in the firm earlier this month and has reportedly been pushing for more share buybacks as it has held talks with LSEG bosses.
In the face of the recent shares slump, chief executive David Schwimmer said recent results showed “another year of very strong financial performance”.
He said: “In the fourth quarter alone, major financial institutions signed long-term contracts worth £1.9 billion to access our leading data and workflow.”
“With our LSEG Everywhere data strategy, we are positioning ourselves as the partner of choice for licensed, trusted data as the use of AI in decision-making scales – and we are seeing very positive signs of adoption,” he added.
It outlined new performance guidance for 2027 to 2029, with aims to deliver “mid to high single digit” growth in total income and further increase profitability.
Despite taking a significant stake in LSEG, the Financial Times newspaper reported earlier this week that Elliott has made assurances to the UK government over its intentions for LSEG as speculation mounted it would look to push for a break-up of the firm or for it to switch its listing to New York.
Rolls-Royce has revealed its annual profit surged by £1 billion and upgraded its outlook for the years ahead, following major military aircraft orders and soaring demand for powering data centres.
The engineering giant said its business divisions were in a good place to benefit from “key global trends” over the coming years.
It reported an underlying operating profit of £3.5 billion for 2025, a jump of 40% from the £2.5 billion made the prior year.
Underlying revenues surpassed £20 billion over the year, up about a 10th on 2024.
This was driven by profit and sales growth across its civil aerospace, defence, and power businesses.
Rolls-Royce said demand for its defence products was strong and it secured major orders during 2025.
This included contracts worth more than £1.5 billion with the UK’s Ministry of Defence and the US’s Department of War for EJ200 and AE 2100 engines to power military aircraft.
New orders for the Eurofighter aircraft engines from Italy, Germany and Spain, as well as export agreements from Turkey, will drive production into the 2030s, it said.
Furthermore, Rolls-Royce said it was benefiting from growing demand for power generation, driven by data centres with revenues up by more than a third.
Rolls-Royce said it was now expecting underlying operating profits to increase to between £4.9 billion and £5.2 billion by 2028 following the strengthened financial performance in 2025.
This is significantly higher than the £3.6 billion to £3.9 billion range that it had previously been targeting.
Chief executive Tufan Erginbilgic said growth would not have been possible “before our transformation”, with the business making £600 million worth of cost savings since 2022.
“With our new capabilities and mindset, we have navigated challenges from supply chain to tariffs, and delivered a strong performance in 2025, all while we built the foundations for significant growth for years to come,” he said.
“Based on our 2026 guidance, we expect to deliver underlying operating profit within the prior mid-term guidance range two years earlier than planned.
“Beyond the mid-term we continue to see significant growth from existing businesses as well as from new business opportunities.”
Business
RBI’s Rs 25,000-Crore Switch Auction On March 2nd And Its Impact On Bond Markets, Government Debt Strategy | Explained
Last Updated:
RBI Switch Auction On March 2: The Reserve Bank of India will conduct a government securities switch auction worth Rs 25,000 crore on March 2 between 10:30 AM and 11:30 AM
In the latest exercise, all securities, having maturities in FY27, are being replaced with bonds maturing after FY32.
RBI Switch Auction On March 2: The Reserve Bank of India (RBI) will conduct a government securities switch auction worth Rs 25,000 crore on March 2 between 10:30 AM and 11:30 AM, with results to be declared the same day and settlement scheduled for March 4. The move marks the third such operation this month and is aimed at smoothing India’s future debt repayment profile.
What is a switch auction?
A switch auction is a debt management tool through which the government exchanges bonds that mature soon with bonds that mature later. Instead of repaying investors in cash when near-term securities mature, the government offers them longer-dated securities. This effectively postpones repayment obligations without increasing total debt.
In the latest exercise, all securities, having maturities in FY27, are being replaced with bonds maturing after FY32, according to RBI data.
Why is RBI conducting it now?
The key trigger is the heavy redemption pressure expected in FY27, when government securities worth about Rs 5.47 lakh crore are scheduled to mature. By replacing these with bonds maturing after FY32, the authorities are spreading repayment obligations across future years. This reduces refinancing risk and prevents sudden spikes in borrowing needs.
How does it help the government?
India has already budgeted gross market borrowing of Rs 17.2 lakh crore. Large redemptions in a single year would force the government either to borrow more or use fiscal resources for repayment. Switch auctions smooth this maturity profile, making debt servicing more predictable and fiscally manageable.
What has happened so far this month?
Before this latest announcement, the RBI conducted two switch auctions in which securities worth Rs 84,804 crore were bought back and replaced. The repeated use of this tool signals a proactive debt-management strategy rather than a reactive measure.
Why markets watch switch auctions closely
Bond investors track such operations because they affect liquidity, yield curves and supply of long-term securities. Extending maturities can reduce pressure on near-term yields while increasing supply at the long end, influencing pricing across the sovereign curve.
The broader takeaway
The latest switch auction is part of a deliberate strategy to manage India’s rising debt stock more efficiently. By pushing repayments further into the future and avoiding bunching of maturities, policymakers aim to maintain stability in government borrowing costs and ensure smoother fiscal operations in coming years.
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February 26, 2026, 11:11 IST
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