(Adds ISM data in paragraph 2, analyst note in paragraph 4)

By David Randall

NEW YORK, July 3 (Reuters) - Benchmark 10-year Treasury

yields fell on Wednesday after growing signs of weakness in

manufacturing and the jobs market suggested the U.S. economy was

slowing.

The ISM Non-Manufacturing index came in at 48.8 in June,

well below the consensus of 52.5 and the 53.8 level in May.

Initial claims for unemployment rose 238,000 in the week ended

June 29, slightly above expectations of 235,000, and up from

234,000 the prior week, the Labor Department said.

Data released earlier in the day by ADP showed private

payrolls rose by 150,000 jobs in June, below consensus estimates

of an increase of 160,000.

"The economy seems to have weakened at quarter-end," said

Bill Adams, chief economist for Comerica Bank.

The Federal Reserve has cited the labor market's resilience

in the face of interest rates at nearly two-decade highs as one

reason why it has yet to cut rates. Futures markets are pricing

in roughly 45 basis points in cumulative rate cuts by the end of

the year.

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

fell 8.9 basis points to 4.347%. The yield on the 30-year bond

dropped 8.5 basis points to 4.524%.

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

moves in step with interest rate expectations, fell 5.4 basis

points to 4.685%.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, an indicator of economic expectations, was

at a negative 34.0 basis points. It had touched its least

shallow inversion since May earlier in the week.

The bond market will close at 2 p.m. ET ahead of the July

Fourth U.S. Independence Day holiday and will reopen on Friday.