NEW YORK, July 31 (Reuters) - U.S. Treasury yields were

mostly lower on Wednesday, after economic data indicated a

slowing in the labor market and wage growth ahead of a policy

announcement by the Federal Reserve later in the day.

The ADP National Employment Report showed private

payrollsrose by 122,000 jobs this month, short of the 150,000 of

economists polled by Reuters, after advancing by an upwardly

revised 155,000 in June.

In addition, the employment cost index (ECI), the broadest

measure of labor costs, increased 0.9% last quarter, below the

1.0% estimate, after rising by an unrevised 1.2% in the first

quarter, another sign inflation is cooling.

"We got a below consensus ADP report, which in and of itself

doesn't typically move markets all that much, but we also got a

below consensus employment cost index report as well," said

Gennadiy Goldberg, head of U.S. rates strategy at TD Securities

in New York.

"That combination is just confirming that we're seeing

inflation and wages slow down and that's important for the Fed,

so if anything it's actually reinforcing the market's

expectation that the Fed will start rate cuts later in the

year."

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

fell 4.4 basis points, its fifth straight session of

declines, to 4.097% after dropping to 4.093%, its lowest level

since March 12.

The reports are on the heels of job openings data on Tuesday

suggested a gradual slowing in the labor market and ahead of a

the key government payrolls report on Friday.

The yield on the 30-year bond was also lower for

a fifth straight session and was last down 5.1 basis points to

4.348% after hitting a six-week low of 4.342%.

The data comes ahead of a Fed policy statement in which the

market is only pricing in a slight chance for a rate cut of at

least 25 basis points, while fully pricing in a cut at the

central bank's September meeting, according to CME's FedWatch

Tool.

While the Fed is expected to hold rates steady, it is likely

the central bank will acknowledge inflation has moved closer to

its 2% target, paving the way for rate cuts later this year.

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 negative 24.9 basis points.

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

moves in step with interest rate expectations,

fell 1.5 basis points to 4.344% after falling to 4.33%, its

lowest since February 2.

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

Inflation-Protected Securities (TIPS) was last at

2.134% after closing at 2.133% on July 30.

The 10-year TIPS breakeven rate was last at

2.23%, indicating the market sees inflation averaging about 2.2%

a year for the next decade.