(Bloomberg) -- Benchmark U.S. Treasury yields touched 1% for the first time since the pandemic-driven turmoil in March as traders weighed the possibility of Democrats winning control of the U.S. Senate.

The 10-year yield, a key global benchmark interest rate, climbed as much as five basis points, on expectation that the Democrats could win two runoff Senate elections in Georgia. The move drove the yield curve steeper, reflecting expectations for a spending surge that would revive the U.S. economy.

“The Georgia election results have been one of the key uncertainties plaguing global markets -- the Democrats pulling ahead has a clear implication on U.S. fiscal policy and bonds,” said Andrew Ticehurst, strategist at Nomura Holdings Inc. in Sydney. “Additional stimulus would have to be funded and markets have clearly indicated they want to test the 1% level for Treasuries today.”

Treasury yields were gaining ahead of the U.S. elections in November, propelled in part by the expectation of more stimulus under a Democrat-led government. The move then faltered with control over the Senate in balance until the Georgia races, though progress on the Covid-19 vaccine rollouts have also buoyed yields, along with the easing in global trade tensions after a historic post-Brexit agreement.

Inflationary expectations have also gained, with the 10-year breakeven rate -- a measure that draws on the pricing of inflation-linked Treasuries -- climbing past 2%, a level last seen more than two years ago.

Investors will be watching whether the 10-year Treasury yield’s advance can push beyond March’s high of 1.27%, for a clear sign of a breakout from the tight ranges that prevailed through much of last year.

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