On Friday, August 10, 2012, the US Treasury Department reported that the U.S. Government had a budget deficit of $69.7B for the month of July.
| Year | 2012 | 2011 |
| $B | $B | |
| July Receipts | 184.6 | 159.1 |
| July Outlays | 254.2 | 288.4 |
| July Surplus (Deficit) | (69.6) | (129.4) |
| Deficit as percent of Outlays | 27.4% | 44.9% |
| 2012 Year-To-Date | $B |
| Year-to-date Receipts | 2,008.7 |
| Year-to-date Outlays | 2,982.5 |
| Year-to-date Surplus (Deficit) | (973.8) |
| Deficit as percent of Outlays | 32.7% |
This shows the information graphically.
(click to enlarge)
The stock and bond markets took the news in stride with mixed results:
All four major stock market index ETFs, (DIA, SPY, VTI and QQQ) were up, while the bond market represented by five major index funds (AGG, BND, LAG, SCHZ and TIP) showed mixed results.
| Ticker | Name | 8/10/12 Price | Change | Yield % |
| DIA | SPDR Dow Jones Industrial Average | 131.93 | 0.36 | 2.44 |
| SPY | SPDR S&P 500 | 140.84 | 0.23 | 1.93 |
| VTI | Vanguard Total Stock Market ETF | 71.86 | 0.14 | 1.99 |
| QQQ | PowerShares QQQ | 66.86 | 0.04 | - |
| AGG | iShares Barclays Aggregate Bond | 111.87 | 0.18 | 3.54 |
| BND | Vanguard Total Bond Market ETF | 84.68 | 0.10 | 3.51 |
| LAG | SPDR Barclays Capital Aggregate Bond | 58.95 | -0.02 | 3.16 |
| SCHZ | Schwab U.S. Aggregate Bond ETF | 52.56 | -0.06 | - |
| TIP | iShares Barclays TIPS Bond | 120.56 | 0.08 | 2.48 |
Bonds vs. Stocks
Currently the 10-year US Treasury bond (Treasury rates at a glance) yields only 1.64% as investors continue to fear stocks and European debt for the relative safety of US debt. DIA, SPY and VTI pay a dividend higher than the 10-year US treasury bond. This could change if the US government continues to spend far more than it takes in and investors lose faith in getting paid back like we saw in Greece.
I doubt the US will default on treasury debt but it will probably continue to dilute the value of the dollar by having the Fed print money to buy US debt to keep rates artificially low. This will eventually lead to inflation so I own equities like SPY and the index fund version of VTI along with individual TIPS.
Disclosure: I am long SPY.
