TREASURIES-US yields drop after data with tariff announcements on deck

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US manufacturing PMI drops to 49.0, signaling contraction

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Job openings fall by 194,000 amid tariff uncertainty

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Fed officials cautious on rate cuts amid inflation concerns

By Chuck Mikolajczak

NEW YORK, April 1 (Reuters) - U.S. Treasury yields were sharply lower on Tuesday, after economic data indicated softness in the manufacturing sector and labor market while the overhang from the pending announcement of tariffs from the Trump administration further dented sentiment. U.S. manufacturing contracted in March after growing for two straight months as the Institute for Supply Management (ISM) said on Tuesday that its manufacturing PMI dropped to 49.0 last month from 50.3 in February. A reading below 50 signals contraction.

A separate report from the Labor Department showed U.S. job openings fell in February by 194,000 to 7.568 million, according to its Job Openings and Labor Turnover Survey, or JOLTS report, as uncertainty surrounding the looming tariffs squelched labor demand.

The data comes as U.S. President Donald Trump prepares to announce new trade barriers that have businesses, consumers and investors unnerved about an intensifying global trade war. The Washington Post reported that White House aides have drafted plans for 20% tariffs on most goods imported to the United States.

"Just a lot of uncertainty with what the tariff rollout is going to be," said Tom di Galoma, managing director at Mischler Financial Group in Stamford, Connecticut.

"Some weaker data but also you know this tariff date is pushing people you know back into pushing accounts back into U.S. Treasuries. They are hiding in there thinking that, we're going to see lower rates, this is not ending very soon."

The yield on the benchmark U.S. 10-year Treasury note fell 9.3 basis points to 4.152% after falling to 4.133%, its lowest since March 4.

The yield on the 30-year bond fell 9.9 basis points to 4.515%.

Reflecting the defensive stance by investors, U.S. stocks were lower, with the S&P 500 falling as much as 0.95% in the early stages of trading while gold hit a fresh record.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 28.3 basis points.

Markets are now pricing in 72 basis points of rate cuts by the end of the year, according to LSEG data, although comments by some Fed officials have suggested the Fed will be deliberate in adjusting rates lower. On Monday, Richmond Federal Reserve Bank President Thomas Barkin said that the timing of any interest-rate cuts will depend on what happens with inflation, with tariffs having the ability to both push up prices and damage the labor market.

New York Federal Reserve President John Williams said that while he cannot predict when the U.S. central bank might change the current level of interest rates, keeping it in place "for some time" will allow officials to study incoming data and decide what they need to do next.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 4.7 basis points to 3.865%.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.620% after closing at 2.623% on March 31.

The 10-year TIPS breakeven rate was last at 2.359%, indicating the market sees inflation averaging about 2.4% a year for the next decade.

(Reporting by Chuck Mikolajczak, Editing by Nick Zieminski)