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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.

Year20122011
$B$B
July Receipts184.6159.1
July Outlays254.2288.4
July Surplus (Deficit)(69.6)(129.4)
Deficit as percent of Outlays27.4%44.9%
2012 Year-To-Date$B
Year-to-date Receipts2,008.7
Year-to-date Outlays2,982.5
Year-to-date Surplus (Deficit)(973.8)
Deficit as percent of Outlays32.7%

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.

TickerName8/10/12
Price
ChangeYield %
DIASPDR Dow Jones Industrial Average131.930.362.44
SPYSPDR S&P 500140.840.231.93
VTIVanguard Total Stock Market ETF71.860.141.99
QQQPowerShares QQQ66.860.04-
AGGiShares Barclays Aggregate Bond111.870.183.54
BNDVanguard Total Bond Market ETF84.680.103.51
LAGSPDR Barclays Capital Aggregate Bond58.95-0.023.16
SCHZSchwab U.S. Aggregate Bond ETF52.56-0.06-
TIPiShares Barclays TIPS Bond120.560.082.48

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.

Source: 2012 Budget Deficit Approaches $1T: Portfolio Positioning