*

US private payrolls increased by 143,000 in September,

exceeding

expectations

*

Expectations for another 50 bps rate cut in November

decrease

(Updated at 2:40 p.m. ET/1840 GMT)

By Chuck Mikolajczak

NEW YORK, Oct 2 (Reuters) - Longer-dated U.S. Treasury

yields rose on Wednesday after economic data pointed to a stable

labor market while investors monitored escalating Middle East

hostilities after Iran fired missiles against Israel.

U.S. private payrolls increased by a more than expected

143,000 jobs in September, according to the ADP National

Employment Report, above the 120,000 estimate of economists

polled by Reuters, adding to signs the labor market may not be

cooling as fast as some initial concerns.

Yields had moved sharply lower in the prior session as Iran

launched more than 180 missiles against Israel in an escalation

of tensions in the region.

On Wednesday, Israel said eight of its soldiers were killed

in combat in south Lebanon as its forces moved into its northern

neighbor in a campaign against the Hezbollah armed group.

The U.S. data comes ahead of the release on Friday of the

government's more comprehensive employment report for September.

Federal Reserve Chair Jerome Powell and other central bank

officials have signaled the Fed's primary focus has shifted from

combating inflation to ensuring a stable labor market.

The Fed kicked off its rate cut cycle in September with a

big 50 basis point reduction.

The yield on 10-year Treasury notes was up 4

basis points at 3.783%. The yield has fallen for five straight

months, including a third-quarter drop of more than 50 basis

points as investors have anticipated an easier monetary policy

from the Fed.

"The one thing to keep in mind is we'd had a rip-roaring

rally, in reaction to what has been a handful of months of

slower data, moderating inflation, that got capped with the Fed

cutting interest rates 50 basis points," said Robert Tipp, chief

Investment Strategist and head of global bonds at PGIM Fixed

Income in Newark, New Jersey.

"This market had come a long way very fast and yesterday's

geopolitical risk took down another rung but given 12 hours to

think about it and nothing more grave developing set the markets

up to get back some of the rally.

"With a mild-upside surprise on ADP it's giving the market

some natural pause here, to reflect on whether it's overreacted

to all the bullish data of recent weeks and months."

Richmond Fed President Thomas

Barkin said

the central bank's cut in September was an acknowledgement

that its policy rate was "out of sync" with where the economy

stands, but shouldn't be seen as a sign the battle with

inflation is finished.

Expectations for another cut of 50 bps at the November

meeting have been decreasing recently, with markets pricing in a

34.7% chance, down from 57.4% a week ago, according to CME's

FedWatch Tool.

The yield on the 30-year Treasury bond rose 5.2

bps to 4.133%.

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 14.6 bps.

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

moves in step with interest rate expectations, edged up 1.4 bps

at 3.635%.

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

Inflation-Protected Securities (TIPS) was last at

2.13%, after closing at 2.097% on Tuesday, its highest close

since July 31.

The 10-year TIPS breakeven rate was last at

2.217%, indicating the market sees inflation averaging 2.2% a

year for the next decade.