The Budget Committee’s vote was 16-21, resulting in a failure to pass the proposal. This outcome may contribute to the US facing a potential increase in the deficit by 1 or 1.5 percentage points, reaching above 7% of GDP.

There is market anticipation that efforts will be made to pass the proposal in due course. The current debate centres around reducing Medicaid spending.

No Further Votes Conducted

It appears that no further votes will be conducted on Capitol Hill today.

With the setback in the committee vote, we’re now looking at a scenario where budgetary imbalances may begin to exert more pressure, especially if follow-up negotiations lose traction. The rejected proposal’s connection to the deficit cannot be discounted – a projected rise towards or beyond 7% of GDP puts additional strain on government bond yields and fiscal outlooks. Markets rarely like uncertainty on the national accounts front, and in this case, the failure to make fiscal trims could limit scope for maneuver on future policy moves.

The focus from lawmakers has shifted, quite publicly, towards healthcare cost savings, with Medicaid as the central lever. That points to a politically sensitive path ahead. We’ve seen precedents where deadlocks here prompt temporary delays, but the longer this continues, the more likely it becomes that macro expectations begin to respond not just to policy itself, but to prolonged dysfunction.

Although there were no fresh votes today, expectations remain that fresh versions of the bill—or amendments that secure broader backing—are on the horizon. That builds in a short-term narrative of stop-start positioning, where both fiscal and political developments require close monitoring. Fixed income markets, in particular, may find themselves caught trying to recalibrate if borrowing levels look poised to rise without a clear offset in spending cuts.

Fiscal Risks Embedded

From our perspective, moves in the coming sessions should be viewed in light of these fiscal risks now appearing more embedded. We’ll be watching for rising volatility around government auction announcements, headline-driven moves in health sector-linked equities, and any further indication of deadlock or agreement emerging from leadership. It’s also reasonable to expect re-pricing on segments of the curve sensitive to debt outlooks—generally speaking, those with durations two years and out.

Execution timing matters more now. Patterns suggest trading volumes thin into gridlock echoes, and wider bid-ask spreads may return if no political momentum resurfaces shortly.

Overall, the lack of voting activity today, despite initial optimism, shows early signs that consensus isn’t merely delayed—it may not yet exist.

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