TREASURIES-US yields drop after data as Trump tariffs awaited

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U.S. 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

(Updates to afternoon U.S. trading)

By Chuck Mikolajczak

NEW YORK, April 1 (Reuters) - U.S. Treasury yields fell on Tuesday, after economic data indicated weakening in the manufacturing sector and the labor market, and the Trump administration's upcoming announcement of tariffs added to investor caution.

U.S. manufacturing contracted in March after growing for two straight months. 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 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.

U.S. President Donald Trump is preparing to announce new trade barriers, which 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 into the United States.

"All of this stuff is just creating a lot of uncertainty in the market," said Andrew Wells, chief investment officer at SanJac Alpha in Houston.

"We don't know until it gets to tomorrow whether the tariffs will go on or not. That's the other thing, is they're trying to bake things in, and it's hard to bake something in that hasn't happened yet."

The yield on the benchmark U.S. 10-year Treasury note fell 9.1 basis points to 4.154%, after falling earlier to 4.133%, its lowest level since March 4.

Goldman Sachs on Tuesday cut its 2025 forecast for the yield on the 10-year note to 4%, citing downside growth expectations.

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

Reflecting the defensive stance by investors, U.S. stocks declined, with the S&P 500 falling as much as 0.95% while gold hit a fresh record.

Canadian Prime Minister Mark Carney said his country will be "very deliberate" when it comes to the countermeasures it imposes if Trump goes ahead with a tariff plan.

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 29.1 basis points.

Markets are now pricing in 73 basis points of interest rate cuts by the end of the year, according to LSEG data, although comments by some Federal Reserve 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, shed 5.1 basis points to 3.861%.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.591% after closing at 2.623% on March 31.

The 10-year TIPS breakeven rate was last at 2.34%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski and Leslie Adler)