June 5 (Reuters) - Benchmark U.S. 10-year Treasury

yields fell to a two-month low on Wednesday after data showed

that employers added fewer jobs in May than economists expected,

ahead of Friday's highly anticipated jobs report.

Yields have tumbled this week as softening economic data

boosts expectations that the Federal Reserve will make two 25

basis point cuts this year.

The rally has also been driven by relief over an absence of

new bond supply, after some Treasury auctions last week saw soft

demand.

"This week has really just been about a lack of supply in

the interest rate markets compounding a little bit of negativity

on the economy," said Guy LeBas, chief fixed income strategist

at Janney Montgomery Scott in Philadelphia. "I don't think the

economic downside is enough to explain all the movement."

Benchmark 10-year yields hit a two-month low after the ADP

Employment report showed that private payrolls increased by

152,000 jobs last month, below economists' forecasts for 175,000

in jobs gains.

Benchmark 10-year note yields were last down 2

basis points at 4.314% and got as low as 4.312%, the lowest

since April 5.

Two-year note yields fell 1 basis point to

4.764%.

The inversion in the two-year, 10-year yield curve

deepened 1 basis point to minus 45 basis points.

This week's main U.S. economic release will be the

government's nonfarm payrolls report for May due on Friday,

which is expected to show that employers added 185,000 jobs in

May. It comes after April's report showed that jobs growth

slowed more than expected, with 175,000 jobs gains, the fewest

in six months.

Traders have said that market participants are preparing for

a weaker figure on Friday than economists expect.

Other data on Tuesday showed that job openings, a measure of

labor demand, were down 296,000 to 8.059 million on the last day

of April, the lowest level since February 2021.

Personal consumption expenditures (PCE) on Friday showing

that U.S. inflation was steady in April and a report on Monday

showing that U.S. manufacturing slowed for a second straight

month in May added to the bond rally.

Services sector data for May is also due on Wednesday.

Next week's consumer price index (CPI) for May will then be

critical for guiding Fed expectations in the near-term. It will

come on Wednesday morning before the Fed is due to complete its

two-day policy meeting, when Fed officials will update their

economic and interest rate projections.