The payment: The US budget deficit decreased to $ 2.71 trillion in the first eleven months of the fiscal year, the Treasury Department said on Monday. That’s $ 297 million, or 10% less than the $ 3 trillion deficit for the same period last year.
In August the deficit decreased to $ 171 billion. In the same month last year, the deficit was $ 200 billion.
Key data: Government revenues rose 18% in the first 11 months of fiscal year to a record $ 3.59 trillion. Corporate taxes rose 57% over the period as corporate profits rebounded from the depths of the pandemic.
Government spending rose 4% over the same period to a record $ 6.3 trillion.
In August, revenue increased 20% to $ 268 million while spending increased 4% to $ 439 billion. The Treasury Department had to pay more interest on government debt this month due to rising yields on inflation-linked government bonds.
Big picture: With just one more month into this fiscal year, it looks like the deficit won’t exceed last year’s record deficit of $ 3 trillion. A Treasury Department official said it would take a big change in the outlook for the deficit in September to reverse the trend.
The ministry still faces serious default risk as Congress attempts to tackle the sovereign debt ceiling. Treasury Secretary Janet Yellen has warned of this delay.
Goldman Sachs estimates that Congress will have to raise the debt ceiling by mid-October. If the deficit turns out to be lower than expected, the department could possibly make all payments by early November.
The outlook for the fiscal year beginning October 1 also remains bleak.
Goldman estimates that the Democrats’ fiscal package will eventually be scaled back from the proposed $ 3.5 trillion to $ 2.5 trillion and offset by around $ 1.5 trillion in new tax revenue.
What do you say: “With September likely to be a slight surplus, the year should end in a deficit of about $ 2.6 trillion,” said TJ Connelly, director of research at Contingent Macro. “While there is scope for another round of spending from previous stimulus packages and potential new infrastructure laws, it appears that the largest fiscal year deficits could be behind us for at least the next few years, as the trend in tax revenues is likely to improve slightly, and the pace.” spending continues to slow down. “
Market reaction: So far, the markets have left the fiscal machinations. The yield on the 10-year government bond TMUBMUSD10Y was 1.325% in the last two weeks in a range of just over 1.30%. This is well below the high of 1.75% that was last recorded in early April.