*

Iran preparing to launch ballistic missile attack against

Israel, says senior White House official

*

JOLTS report shows job openings rebounded by 329,000 to

8.040

million

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Manufacturing PMI unchanged at 47.2, indicating sector

contraction

By Chuck Mikolajczak

NEW YORK, Oct 1 (Reuters) - U.S. Treasury yields dropped

on Tuesday as signs that hostilities in the Middle East were

escalating boosted safe-haven demand for bonds.

A senior White House official said on Tuesday the United

States has indications that Iran is preparing to imminently

launch a ballistic missile attack against Israel, with the U.S.

actively supporting preparations to defend Israel.

A U.S. official told Reuters that initial indications

suggested the possible Iranian strike could be at least as large

as the one in April, although it was difficult to be certain.

The yield on the benchmark U.S. 10-year Treasury note

was down 8.6 basis points to 3.716% after falling

to 3.696%, its lowest since Sept. 18.

In U.S. economic data, the Job Openings and Labor Turnover

Survey, or JOLTS report, showed job openings, a measure of labor

demand, rebounded by 329,000 to 8.040 million, but hiring was

soft and consistent with a cooling labor market.

The manufacturing sector held steady at weaker levels in

September, as the Institute for Supply Management (ISM) said its

manufacturing PMI was unchanged at 47.2 last month, slightly

below the 47.5 estimate of economists polled by Reuters. A PMI

reading below 50 indicates contraction in the manufacturing

sector.

"One of the reasons why the market went to reverse so hard

was because of this geopolitical risk that we're seeing," said

Tom di Galoma, managing director and head of fixed income at

Curvature Securities in Park City, Utah.

"Also, we did get some data that was a bit weaker... but the

overriding factor right now is this geopolitical talk and what

exactly is going to happen in the Mideast and where else."

The yield on the 30-year bond fell 7.6 basis

points to 4.057%.

Yields had risen on Monday after Federal Reserve Chair

Jerome Powell suggested the central bank will take a gradual

approach in cutting interest rates.

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 11.6 basis points.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, declined 5.1

basis points to 3.6%.

The breakeven rate on five-year U.S. Treasury

Inflation-Protected Securities (TIPS) was last at

2.090% after closing at 2.086% on Sept. 30.

The 10-year TIPS breakeven rate was last at

2.181%, indicating the market sees inflation averaging about

2.2% a year for the next decade.