In Government We Trust

Over the past 12  months through January, the federal budget deficit totaled "only" $1.6 trillion. That's down from over $4.0 trillion during the pandemic, but it has been widening again in recent months (chart).

The bond market rarely reacts to the Treasury's monthly deficit release. That's remarkable considering that the Fed stopped buying and rolling over maturing Treasury securities last summer (chart). The Treasury bond market seems to be driven more by inflation and how the Fed is likely to respond to it than by supply and demand.