June Deficit Narrows to $120 Billion, While FY2026 Borrowing Remains Above Last Year

The U.S. federal budget deficit totaled $120.0 billion in June, narrower than economists' forecast of $132.8 billion and significantly lower than May's $293.0 billion deficit, according to the U.S. Treasury Department's Monthly Treasury Statement.

Fiscal year borrowing remains elevated

Despite the improvement in June, the federal government has borrowed $1.4 trillion during the first nine months of fiscal year 2026, approximately $35 billion more than during the same period a year earlier, according to the Congressional Budget Office (CBO).

The Committee for a Responsible Federal Budget (CRFB) said current borrowing trends indicate the full-year deficit could exceed $2 trillion.

June deficit

The Treasury Statement showed the June deficit was smaller than the previous month. Budget outcomes can be influenced by changes in tax receipts, government spending and calendar-related timing effects.

The CBO noted that because June 1, 2025 fell on a weekend, certain federal payments were shifted into May 2025, increasing the reported June 2025 deficit. After adjusting for that timing difference, the June 2026 deficit was estimated to be approximately $56 billion larger than the comparable period a year earlier.

Investors are expected to continue monitoring U.S. fiscal developments alongside upcoming inflation data and Federal Reserve communications, as government borrowing and monetary policy remain important factors for Treasury and currency markets.

Sources: U.S. Treasury Department; Congressional Budget Office; Committee for a Responsible Federal Budget.