A (relatively) quick note on market expectations over the debt ceiling and gov't shutdown. (updated)

People are, rightfully so, concerned about how the combined government shutdown and debt ceiling issues are playing out in the stock market.  But take a look at Treasuries, because there's an interesting split between the 4 week through 2 year yields and the 3 year through 30 year yields.  The 4 week through 2 year yields are going up, while the longer term rates are ever-so-slightly sagging.

This divergence started with the government shutdown.

So it seems that no one is panicking over the long-term, but that in the very short term, things are volatile, especially when it comes to the issue of repayment of 4-week T-Bills, now with an effective yield higher than that of 1 year bills.  But why the cutoff in trends at the 2 year yield, rather than closer to the 3-month T-Bill?

Is the market trying to figure out how to price bonds in a new, 2-year recession?

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Update: I forgot to add, that while this might be some sort of signal, in reality these numbers are still at historical lows.  So for instance, going back to Jan. 3, 2006 the one-month T-Bill sat at 4.05% while the 10 year bond was 4.37%.

So what we're really looking at today, is the curious inversion where the shortest-term rate is climbing above slightly longer rates.  So far no one is panicking (except of course, in stocks), but the oddity of the inversion usually implies some sort of expectation of a recession or at least instability.