Group 1: Short-term Impact of the "Great Beauty Act" - The "Great Beauty Act" is expected to have limited short-term market impact due to prior market adjustments over the past two months, with bond yields already reflecting the anticipated changes[6] - The act was passed with a narrow margin of 218 votes in favor and 214 against, and signed into law on July 4, 2025[9] - Concerns about a large-scale fiscal expansion causing market turmoil are mitigated by the expectation that upcoming debt issuance will primarily rely on short-term bonds, stabilizing long-term bond supply[6] Group 2: Long-term Implications of the "Great Beauty Act" - The act is projected to increase the deficit by approximately $4.1 trillion over the next decade, with tax cuts estimated at $4.5 trillion and spending cuts at $1.4 trillion[12] - The Congressional Budget Office (CBO) predicts that the act will raise the deficit rate to between 6.4% and 7.1% over the next five years, reflecting a structural shift in fiscal policy[30] - The act's long-term significance lies in its potential to reshape market perceptions of the U.S. fiscal cycle, establishing a "new normal" for deficit levels rather than reverting to historical averages[30] Group 3: Economic Growth Projections - Neutral institutions forecast that the act will contribute an additional economic growth of between -0.1% and 1.1% over the next decade, indicating a modest impact on overall economic performance[23] - The act's primary policies are extensions of existing measures, suggesting minimal marginal changes to the economic landscape[27] - Historical data shows that previous tax reforms had limited effects on corporate investment, indicating skepticism about the act's ability to drive significant economic growth[29]

Group 1: Legislative Overview - The "Great Beauty Act" was passed by the U.S. House of Representatives with a narrow margin of 218 votes in favor and 214 against, and was signed into law by Trump on July 4, 2025[6] - The act is expected to increase the deficit by approximately $4.1 trillion over the next ten years, with tax cuts of about $4.5 trillion and spending cuts of around $1.4 trillion[12][13] Group 2: Market Impact - The market impact of the "Great Beauty Act" is expected to be limited in the short term, as the bond market has already priced in the information over the past two months[6] - The upcoming debt issuance is likely to be managed through short-term bonds, which will not significantly affect long-term bond supply and demand[6][18] Group 3: Economic Projections - The Congressional Budget Office (CBO) and the Committee for a Responsible Federal Budget (CRFB) predict that the deficit rate will rise to between 6.4% and 7.1% over the next five fiscal years due to the act[29][28] - Neutral institutions expect the act to contribute an additional economic growth of between -0.1% and 1.1% over the next ten years, indicating a very mild upward impact on the economy[22][23] Group 4: Long-term Implications - The act is likely to force the market to reassess the "new normal" of the U.S. fiscal cycle, leading to a higher central pricing for long-term U.S. Treasury yields[27] - The current 10-year Treasury yield is estimated to be around 4.1%, which is above its fair value, suggesting that the yield may continue to rise in the short term[38][41]