Bond Market Update

Data Recon

• The Treasury Budget for June showed a surprising surplus of $27.0 billion (Briefing.com consensus: -$257.5B) compared to a deficit of $71.0 billion in the same period a year ago. The June surplus resulted from receipts ($526 billion) exceeding outlays ($499 billion). The Treasury Budget data are not seasonally adjusted, so the June surplus cannot be compared to the May deficit of $315.7 billion.
  • The key takeaway from the report is that it showed an actual surplus, with receipts exceeding outlays. The good news is that the deficit over the last 12 months shrunk from $1.994 trillion in May to $1.896 trillion in June. The bad news is that the deficit over the last 12 months is still $1.896 trillion.
    • Individual Income Taxes were the largest source of receipts in June ($236 billion), followed by Social Insurance & Retirement Receipts ($183 billion). Separately, Custom Duties were $27 billion, bringing the fiscal year-to-date total to $108 billion.
    • The largest outlays by function were Social Security ($141 billion), Net Interest ($84 billion), Health ($80 billion), and National Defense ($70 billion).
    • The fiscal year-to-date deficit is $1.338 trillion versus $1.273 trillion in the same period a year ago.
    • The budget deficit over the last 12 months is $1.896 trillion versus $1.994 trillion in May.
  • The Treasury market's initial reaction to the budget news has been muted.
• Yield check:
  • 2-yr: +3 bps to 3.90%
  • 3-yr: +4 bps to 3.88%
  • 5-yr: +5 bps to 3.99%
  • 10-yr: +7 bps to 4.42%
  • 30-yr: +8 bps to 4.95%