With $258 Billion in the Black, U.S. Treasury Posts Historic Surplus
Experts Say It May Signal Brighter Days Ahead
As I read the often dismal analysis in the media, I was reminded of a quote from the Friday, May 23, 2025 edition of The Wall Street Journal, Opinion Section (page A13):
“Making predictions is hard to do, especially about the future.”
—Supposedly from Yogi Berra
Despite the media’s gloom, a striking report caught my eye—shared by The Economic Times (India) via Yahoo News—stating that the U.S. government posted the second-highest monthly budget surplus in history, recording a $258.4 billion surplus in April 2025. This trails only April 2022’s surplus of $308.2 billion.
Key Drivers of the Surplus
This marked the first monthly surplus of fiscal year 2025 (which began in October 2024), largely attributed to an influx of individual tax payments, as April is the deadline for filing final taxes and the first quarterly estimated payments for many individuals and businesses.
Additionally, customs duties—boosted by President Trump’s tariffs—contributed $15.6 billion, more than double April 2024’s $6.3 billion. While still a modest slice of the total, it’s a noteworthy increase.
While it’s too early to predict consistent surpluses or long-term fiscal balance, this positive development is a welcome change from the negativity dominating U.S. news outlets.
Treasury Yields Rebound, Yield Curve Steepens
As of late May:
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30-Year & 20-Year Treasury Yields are back above 5%
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10-Year Yields exceed 4.5%
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Mortgage Rates have climbed back over 7%
The six-month Treasury yield—often a reliable predictor of near-term rate changes—has ticked up by 20 basis points since early April and now aligns closely with the Effective Federal Funds Rate (EFFR). This uptick reflects the Fed’s continued "wait-and-see" approach, echoed by Federal Reserve officials in recent commentary.
A Closer Look at the Yield Curve
On May 23, 2025, the yield curve revealed a steepening at the long end, while the previous sag in the middle (between the 6-month and 7-year yields) has flattened:
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Long-term yields (7 to 30 years) are now above short-term yields, effectively reversing the previous inversion.
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This normalization—or “re-un-inversion,” as some traders call it—suggests increasing confidence in longer-term economic growth.
A Recession? Not So Fast.
To me, this is not a signal of an impending recession. In fact, bond traders and the bond market are often better indicators of economic direction than the sensationalist headlines of mainstream media. Bad news simply sells better.
We're still far from any reliable long-term forecasts, but Treasury Secretary Besset’s cautious and deliberate approach appears to be yielding results. His philosophy of “slow and steady” economic management aims to stabilize the U.S. economy while gradually improving budget surpluses and reducing deficits—something that appeals to both Wall Street and Main Street.
The Case for Lower Interest Rates
As the U.S. pushes for increased domestic manufacturing, lower interest rates are essential:
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Lower federal borrowing costs—reducing the inflationary pressure of growing interest payments on national debt.
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Lower financing costs for manufacturers—helping control the cost of goods sold, as manufacturing costs are embedded in all consumer products.
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