The Budget Committee voted 16-21, which means the proposal did not pass. This outcome could lead to a potential increase in the US deficit by 1 to 1.5 percentage points, pushing it above 7% of GDP. Experts expect that efforts will continue to pass the proposal eventually. Right now, the main topic of discussion is cutting Medicaid spending. There won’t be any more votes on Capitol Hill today. With the committee vote setback, we now have to consider that budget imbalances might cause more pressure, especially if future negotiations stall. The rejected proposal directly impacts the deficit, as a projected rise to 7% of GDP could affect government bond yields and financial forecasts. Markets generally dislike uncertainty in national accounts, and failing to make budget cuts might restrict future policy options. Lawmakers are now focusing on saving costs in healthcare, particularly through Medicaid. This is a politically sensitive issue. We’ve seen that deadlocks can lead to temporary delays, but if this situation goes on, macroeconomic expectations may react not just to policy changes but also to ongoing dysfunction. While there were no new votes today, there is still hope for new versions of the bill or amendments that could gain wider support. This creates a short-term narrative of stop-start activity, where both fiscal and political developments need careful attention. Fixed income markets might struggle to adjust if borrowing increases without corresponding spending cuts. Looking ahead, we should view upcoming moves in the context of these emerging fiscal risks. We will be monitoring rising volatility around government auction announcements, shifts in health sector stocks, and any signs of deadlock or agreement from leaders. There may also be re-evaluations in parts of the yield curve sensitive to debt situations, particularly those extending two years and beyond. The timing of actions is crucial now. Historical patterns show that trading volumes may shrink during periods of gridlock, and wider bid-ask spreads could return if political momentum doesn’t pick up soon. Overall, today’s lack of voting, despite earlier optimism, indicates that reaching a consensus isn’t just delayed—it may still be elusive.

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