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US JOLTS report shows lower job openings

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US factory orders drop

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US yield curve slightly flattens as bond market stabilizes

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Long-dated sell-off due to higher term premium -analyst

(Recasts, adds new comment, graphics, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 4 (Reuters) - U.S. Treasury yields slipped

on Tuesday in volatile trading, weighed down by persistent

uncertainty surrounding the administration's trade policy after

a slew of headlines on tariffs ended up with Canada and Mexico

getting 30-day reprieves on those duties.

U.S. President Donald Trump on Monday suspended his threat

of 25% tariffs on Mexico and Canada at the last minute, agreeing

to a 30-day pause in return for concessions on border and crime

enforcement.

China, on the other hand, imposed targeted tariffs on

American imports on Tuesday and put several companies, including

Google, on notice for possible sanctions, in what market

participants described as a measured response to an additional

10% U.S. tariff on Chinese exports.

China's new tariffs will not take effect until Feb. 10,

giving Washington and Beijing time to try to seek a deal that

Chinese policymakers have indicated they hope to reach with

Trump.

"There's going to be that push and pull throughout the next

couple of quarters as the market gets used to the tariffs and

threats: what's actionable and what's just bluster," said

Lawrence Gillum, chief fixed income strategist, at LPL Financial

in Fort Mill, South Carolina.

Treasury yields earlier fell after data showing U.S. job

openings dropped sharply in December. The Bureau of Labor

Statistics' Job Openings and Labor Turnover Survey, or JOLTS

report showed that job openings, a measure of labor demand, slid

to 7.6 million on the last day of December.

In afternoon trading, the benchmark 10-year yield was last

down 2.8 basis points (bps) at 4.515%, after

dropping on Monday to its lowest since mid-December.

"I still think the 10-year yield could hit below 4%

later this year, but that's really predicated on a slowing

economy," said Gillum. "If data continues to hold up, there's no

reason that we can't trade between 4.50% to 5%."

U.S. 30-year yields also slid to 4.751%, down 2 bps

.

On the short end of the curve, U.S. two-year yields,

which are tied to the Federal Reserve's policy moves, fell 5.1

bps to 4.214%.

Also helping push the two-year yield down was a report

showing new orders for U.S.-manufactured goods dropped 0.9% in

December after a revised 0.8% decline in November. Economists

polled by Reuters had forecast factory orders would fall 0.7%

after a previously reported 0.4% drop in November.

The yield curve, meanwhile, flattened modestly on Tuesday,

with the gap between two-year and 10-year yields at 29.7 bps

, from 30.2 bps in the previous session. The curve

hit its narrowest since late December on Monday after the

initial tariff announcements.

Investors have been selling the long end of the curve,

demanding higher compensation, or the so-called "term premium,"

in exchange for dealing with policy uncertainty over a longer

time horizon. The current term premium for U.S. 10-year notes

stood at 72 bps, according to estimates from the St. Louis Fed,

compared with about 45 bps in early December.

"You expect yields to fall further, but that lack of clarity

on policy is really giving intermediate and long-term investors

more pause," said Chip Hughey, managing director of fixed

income, at Truist Advisory Services in Richmond, Virginia.

U.S. rate futures, meanwhile, have priced in about 46 bps of

easing this year, or nearly two rate cuts of 25 bps each. That

was up from 41 bps late on Monday, according to LSEG

calculations, with the first rate cut likely happening at the

Fed's June or July policy meeting.