The 10-year Treasury yield jumped above 1% for the first time since the pandemic-triggered rout in March as traders awaited results from the Senate runoff races in Georgia.

The benchmark rate breached the key psychological level in overnight trading as ballot counting went underway. The 10-year rate last traded 10 basis points higher at 1.057% on Wednesday. The yield on the 30-year Treasury bond also jumped 13 basis points to 1.835%. Yields move inversely to prices.

Democrat Raphael Warnock is projected to win the Georgia U.S. Senate special election runoff against incumbent Republican Kelly Loeffler, according to NBC News. The other runoff race between Democrat Jon Ossoff and Republican David Perdue is too close to call, NBC News reports.

The contests will determine control of the Senate for the next two years. Many believe a Democrat-controlled Senate could make it easier for lawmakers to push through a bigger stimulus. More government spending could lead to higher inflation, which would drive yields higher.

"It's almost like the market is just relieved we are getting to a conclusion and yields are forming a higher range. Investors are betting more deficits, more spending and more Treasury issuance if Democrats gain control of Senate," said Gregory Faranello, head of U.S. rates at AmeriVet Securities. "Now that the 10-year broke 1%, we are going to spend some time in the 0.75% to 1.25% range."

Earlier this week, the breakeven rate for 10-year inflation expectations touched 2% for the first time in more than two years.

It has been a sluggish rebound for the 10-year rate, which tumbled to a record low of 0.318% in March amid a historic flight to safe assets in the depth of the pandemic. With the unprecedented monetary and fiscal stimulus, bond yields have gradually trended higher but the persisting Covid uncertainty and uneven economic data have kept rates' recovery bumpy.

"With the likelihood of Democrats gaining control of the Senate, it's not surprising to see this modest weakness in equities and a steeper and cheaper term structure in rates," said Kevin Walter, Barclays' co-head of global Treasuries trading.

"On the equity side, stocks typically prefer a divided congress and now need to price in a greater probability for higher corporate tax rates. Offsetting that is the more likely prospect for fiscal stimulus. In the treasury space, that increase in spending translates into more back-end supply and higher inflation, hence the steeper curve," Walter said.

Goldman Sachs expects another big stimulus package to the tune of $600 billion in the near term if Democrats prevail and take the Senate.

Also on Wednesday, investors digested a weaker-than-expected report on private payrolls. ADP said private payrolls fell 123,000 in December, marking the first contraction since the early days of the pandemic. Economists surveyed by Dow Jones had been expecting growth of 60,000.

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