Previous : 177.7 Billion
Forecast : 160.0 Billion

Definition : The U.S. Treasury releases a monthly account of the surplus or deficit of the federal government. Changes in the budget balance of the annual fiscal year (which begins in October) are considered as an indicator of budgetary trends and the change in fiscal policy.

Why is it useful?The US treasury budget occasionally moves markets, and specifically treasuries, as the budged deficit is directly tied to the supply of treasuries securities in the market; as the Federal government borrows money through the issuance of Treasury securities. Then the wider the deficit they will issue more notes to finance their operations.

Here comes simple supply and demand concept, if demand is constant but the supply of securities goes up, the price goes down. The same is true if the deficit narrows, the government then needs to sell fewer Treasury bonds, so the supply drops and the price of T-bonds rises.

So within this equation if supply is enlarged at constant demand which is forcing securities prices lower, then by default the yield on them will rise, and by that the government is borrowing money at higher interest rates. The ripple effect then spreads to all other interest rate-bearing securities creating a higher interest-rate environment which is of negative impact on equities.

Accordingly in another indirect manner we can tie the budget to a number of issues which can declare to us in a lagging manner the state of the economy. As the more the government spends on improving the health benefits and pensions and other areas then that means they are sparing the public with less obligations which means they will tend to spend more in the economy which supports the GDP.

While if they are to carry fiscal reform and included by that taxes, by looking at the government tax receipts as if the income to the government form taxes is high means the economy is expanding and lowers the deficit, while if its lower means economic conditions are sluggish. The more they actually tax they are curbing available money in the economy to business and consumers which dents spending and that all correlates to economic expansion and expenditure.

Again the effect is as mentioned above the clearest on treasuries and securities, while on the currency market is occasionally more looked from the explained fiscal perspective.