(Updates at 1020 GMT)

By Harry Robertson and Ankur Banerjee

Aug 5 (Reuters) - U.S. Treasury yields tumbled on Monday

as traders moved to price in big rate cuts from the Federal

Reserve, after weak jobs data stoked worries that the U.S.

economy could be heading for a recession.

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

sensitive to Fed rate expectations, dropped to 3.691% in

European trading, its lowest since May last year. It was last

down 10 basis points (bps) at 3.77%.

The yield, which moves inversely to the price, plunged 53

bps last week.

Friday's nonfarm payrolls data - which showed the U.S.

unemployment rate unexpectedly rose in July and jobs growth

slowed - followed a slew of disappointing earnings results from

major tech firms, setting off a global stock selloff and driving

investors to safe haven assets.

Investors are also grappling with a dramatic rally in the

Japanese yen which has rocked the country's markets, helping

send the Nikkei 225 stock index down 12.4% on Monday in

its biggest one-day drop since 1987. U.S. S&P 500 futures were

down 2.7%.

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

was down 5 bps at 3.742%, having touched a one-year

low of 3.678% earlier in the session. The yield sank nearly 40

basis points last week, the largest weekly fall since March

2020.

Michael Weidner, co-head of global fixed income at Lazard

Asset Management, said the rally in bond markets was being

amplified by investors worrying about their positions in tech

stocks and by thin summer markets.

"The move over the last two days in particular, that's not

as much driven by fundamentals as it is by the correction in

U.S. equity markets," he said.

"We believe still that a soft landing (for the economy) is

more of a base-case scenario."

Markets are now anticipating around 125 bps of U.S. rate

cuts this year, up from around 90 bps on Friday and 50 bps at

the start of last week.

Traders now think a 50 bp cut in September is a near

certainty, according to derivative market pricing.

The closely watched U.S. 2-year-to-10-year yield curve

narrowed its inversion, to 2 bps, the least since

July 2022, reflecting expectations for a sharp easing of

short-term yields.