Services Strength Nudges Rates Higher

[Andrew Postell]

Markets opened the week under modest pressure, with Treasury yields edging slightly higher and mortgage pricing giving back some recent gains. The move followed a stronger‑than‑expected ISM Services report this morning, which reinforced the narrative of continued resilience in the services sector and remaining underlying inflation pressures. While not a game‑changer on its own, the data was enough to nudge rates higher in an already low‑liquidity, headline‑sensitive environment.

Adding to the tone, Treasury Secretary Scott Bessent testified before Congress, emphasizing continued support for a strong‑dollar policy, warning against over‑regulation of the financial system, and defending the administration’s view that the economy remains on solid footing. On rates, Bessent underscored the importance of market‑driven pricing of government debt and reiterated that Federal Reserve policy decisions ultimately rest with the Fed, even as the administration continues to voice its preferences publicly. Markets largely interpreted the testimony as neutral but consistent with a pro‑growth, market‑friendly policy posture.

Finally, while the federal government has reopened, the January employment report will not be released until next Wednesday, delaying what would typically be the most important data point of the week. Until then, markets are likely to remain range‑bound and uninspired, leaning on secondary data and headlines rather than making large directional moves. In the near term, this dynamic leaves rates susceptible to incremental pressure rather than sustained trends until fresh labor data restores clearer visibility.

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