(Recasts, adds Trump statement, updates yields throughout)

WASHINGTON, Oct 10 (Reuters) -

Benchmark U.S. yields were sharply lower late Friday

morning, extending losses from earlier in the session after

President Donald Trump threatened a "massive" increase in

tariffs on imports from China.

The president's lengthy statement on Truth Social pushed

rates out of their recent range-bound pattern, with the 10-year

Treasury yield hitting its lowest level since mid-September. The

sharper decline in Treasury yields mirrored a dip seen in

stocks, often a sign investors are seeking a safe haven.

U.S. sovereign debt had been in a holding pattern in recent

days as a government shutdown,

now in its tenth day

, halted the production of crucial economic indicators.

"It's fuel on the fire. For a while it looked like things

were going well between Trump and Xi, but China's latest export

controls on rare earth minerals set Trump off," said Brian

Jacobsen, chief economist at Annex Wealth Management.

"A lot can happen between now and the APEC summit where they

were supposed to meet, so it wouldn't be surprising to see

tempers cool before then."

Earlier, Federal Reserve Governor Christopher Waller had

told CNBC the central bank could make "cautious" moves to lower

benchmark lending rates, helping comfort investor expectations

that the central bank would not be driven to excessive rate

cutting by changes in staffing and a weakening labor market.

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

fell 8.9 basis points to 4.057%, its lowest since

September 18. The yield on the 30-year bond fell

8.2 basis points to 4.651%.

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 53.7 basis points.

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

typically moves in step with interest rate expectations for the

Fed, fell 7.7 basis points to 3.522%.

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

Inflation-Protected Securities (TIPS) was last at

2.387% after closing at 2.425% on October 9.

The 10-year TIPS breakeven rate was last at

2.33%, indicating the market sees inflation averaging about 2.3%

a year for the next decade.