Bigger picture: Given the way things are going, the U.S. might record a trillion-dollar deficit this fiscal year.
Most of the jump can be explained by June 1 occurring on a weekend, which forced some federal payments into May. Excluding those calendar adjustments, the deficit still would have increased by 8%, with spending up by 6% and revenue up by 4%.
What will recur are growing payments for Medicare, Social Security and defense. Medicare spending surged 73% — mostly because of the timing shift, though it would have rose 18% otherwise. Social Security benefits rose by 11% and defense spending rose 23%. Customs duties — tariffs, mostly — jumped 62% to $5 billion. The U.S. has increased tariffs on some $200 billion of Chinese goods to 25% and is threatening to levy that same rate on over $300 billion more if trade negotiations between U.S. President Donald Trump and Chinese President Xi Jinping are not successful.
The yield on the 10-year Treasury TMUBMUSD10Y, +0.08% has dropped from as high as 3.23% in November to just 2.13%.
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