Bond Market Update

Data Recon

• The Treasury Department reported a $432.3 billion deficit for July versus a deficit of $291.1 billion for the same period in July 2025. Receipts totaled $334.0 billion, while outlays reached $766.3 billion.
  • The key takeaway from the report is that the net interest outlay exceeded the national defense outlay, which is saying something given that the U.S. is at war with Iran.
    • Individual Income Taxes ($173 billion) was the largest source of receipts in July, followed by Social Insurance & Retirement ($139 billion). Customs duties were -$9.0 billion.
    • The largest outlays by function were Medicare ($174 billion), Social Security ($141 billion), Net Interest ($104 billion), and National Defense ($91 billion).
    • The fiscal year-to-date deficit is $1.799 trillion versus $1.628 trillion in the same period a year ago.
    • The budget deficit over the last 12 months is $1.946 trillion versus $1.805 trillion in June.
• Yield check:
  • 2-yr: -2 bps to 4.20%
  • 3-yr: -1 bp to 4.27%
  • 5-yr: -1 bp to 4.39%
  • 10-yr: +1 bp to 4.69%
  • 30-yr: +1 bp to 5.25%