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US rates headed for a break higher

ADMIN || 8th January 2026

The case for a break higher in Treasury yields is building as the latest jobs data in the aggregate points to resilience over weakness, potentially stemming expectations for the Federal Reserve’s path of easing.

To sum up today’s data dump, yields on 10s fell more than 5 bps earlier to 4.122%, the lowest of the year after a slower-than-expected rise in ADP employment numbers. Ten-year Treasuries have since pared declines to ~4.14% after upside surprises in ISM services and its labor component. The net of it all keeps 10s in the middle of the 4.10% to 4.20% range that’s been in place for over a month.

While ADP data missed expectations, the details were strong with small business hiring up 9,000 from -120,000 in November. The jump could represent a sea change after small companies shed jobs in 2025. That’s important because mom-and-pop shops are job creators that employ about half the US workforce. What’s more, job changer wages increased, a sign employers are competing for workers. Both bode well for a rise in yields.

The ISM Services report, meanwhile, was more overtly robust, highlighted by the healthiest growth in services employment since February. Comments in the report focused on hiring and labor market stabilization also signaling an economy on firm footing.

Bonds need a clear macro input to establish a new range. With aggregate data tending towards the strong side the final piece of the puzzle will be Friday’s December jobs report.

The median estimate is for a nonfarm payroll gain of 70,000, according to a Bloomberg survey against our estimate of 85,000. With details of the ADP and ISM Services reports in hand, there’s now a bigger focus on some of the higher estimates, particularly 155,000 from Jefferies. A higher-than-expected reading could well be the catalyst for decisive move higher in yields after December’s range-bound trading.

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