The Treasury budget deficit rose to $220.8 billion in July from $211.1 billion in July a year ago, on an unadjusted basis. Expectations for the latest figure centered on a deficit of $190 billion.

Outlays in July rose to $496.9 billion from $480.3 billion in July 2022. Receipts rose to $276.2 billion from $269.3 billion a year ago.

The deficit on a fiscal year to date basis ballooned by $887 billion to $1.613 trillion from $726 billion in the same period of fiscal 2022.

A Treasury official told reporters the interest on the public debt hit a record of $726 billion for the year to date period, up 23 percent from the same period of FY 2022.

Education Department outlays surged by $83 billion or 761 percent in July from the year ago period due to increased subsidies and student loan changes but not loan forgiveness, Treasury said.

Individual tax receipts were $247 billion in July, up 10 percent from the year-ago month. Individual tax refunds surged by 165 percent from a year ago to $23 billion in July. Treasury did not say what accounted for that.

Expectations center on a deficit of $190 billion for July.

The U.S. Treasury releases a monthly account of the surplus or deficit of the federal government. Changes in the budget balance reflect Federal policy on spending and taxation. The government's fiscal year begins in October.

The budget data have several direct and indirect meanings for the financial markets. The most direct relationship lies between the size of the budget deficit and the supply of Treasury securities. The higher the deficit, the more Treasury notes and bonds the government must sell to finance its operation. From there it's simple supply and demand -- if demand is constant but the supply of bonds goes up, the price goes down. The same is true if the deficit falls or is eliminated altogether -- the government needs to sell fewer Treasury bonds, so the supply drops and the price of T-bonds rises. In the past few years, the budget deficit has increased dramatically, and this has put more Treasury securities into the market place.

The Federal government borrows money through the issuance of Treasury securities; so higher deficits mean a larger supply of securities and (again, assuming constant demand) lower prices. With notes and bonds, lower prices are equated with higher yields, so in this example, the government borrows money at higher interest rates. That impact ripples across all other interest rate-bearing securities and creates a higher interest-rate environment for stocks, which is bearish.

In addition to following the trend in the budget deficit or surplus, investors can gain valuable insight to the state of the economy by looking at the government's tax receipts. Higher tax receipts lead to an improved deficit situation when economic conditions are strong; conversely, lower tax receipts reflect a sluggish economic environment.