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TREASURIES-Bond market rallies on big slowdown in U.S. private-sector jobs growth

Richard Leong

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* U.S. private jobs growth slowest in over nine years - ADP

* Brainard says Fed prepared to adjust policy to support expansion

* Futures imply traders see multiple U.S. rate cuts by year-end

* Fed's Beige Book on regional economic conditions on tap

(New thoughout, updates, prices, market activity and comments, adds table) NEW YORK, June 5 (Reuters) - The U.S. Treasuries market resumed its rally on Wednesday with two-year yields hitting their lowest since December 2017 in the wake of a report that showed private domestic jobs growth decelerated in May to its weakest level in over nine years. The weak ADP National Employment Report, together with hints of possible rate cuts from Federal Reserve officials, spurred buying of U.S. government debt. Analysts have blamed the weakening U.S. data on escalating trade tensions between the United States and major trading partners including China, Europe and Mexico. "There are a lot of risks to the economy," said Mary Ann Hurley, vice president of fixed income at D.A. Davidson in Seattle. "They are serving as a support for bond prices and a fall in yields." Senior Fed officials have acknowledged those risks could derail the economic expansion, which this summer could become the longest in history. Fed Governor Lael Brainard told Yahoo Finance on Wednesday the Fed is prepared to adjust interest rates to sustain economic growth. At 10:28 a.m. (1428 GMT), yields on two-year Treasury notes , which are sensitive to views on Federal Reserve policy, were 6.60 basis points lower at 1.807% after hitting 1.773%, the lowest since December 2017. Ten-year Treasury yields were down 1.90 basis points at 2.102%, hovering near their lowest since September 2017. The spread between two-year and 10-year yields grew to near 31 basis points, the widest in seven months. The interest rates on three-month bills held above 10-year yields for a ninth straight session. A sustained inversion between these two debt maturities has preceded every U.S. recession in the past 50 years. Investor demand for Treasuries was curbed by gains on Wall Street with the S&P 500 index rising 0.3% and a stronger-than-expected report on U.S. services sector in May from the Institute for Supply Management. Traders will receive more data at 2 p.m. (1800 GMT) when the Fed releases its latest Beige Book on regional economic conditions. In the futures market, the federal funds contracts implied traders have priced in a 61% chance the Fed would reduce borrowing costs by at least 75 basis points by year-end, up from 54% late on Tuesday and 14% a week earlier, CME Group's FedWatch tool showed. June 5 Wednesday 10:30AM New York / 1430 GMT Price

US T BONDS SEP9 153-22/32 0/3210YR TNotes SEP9 127-36/256 6/32Price Current NetYield % Change

(bps)

Three-month bills 2.29 2.3417 -0.015Six-month bills 2.195 2.2505 -0.051Two-year note 100-155/256 1.8128 -0.060Three-year note 100-252/256 1.7797 -0.054Five-year note 100-190/256 1.8434 -0.040Seven-year note 100-236/256 1.983 -0.02410-year note 102-100/256 2.1071 -0.01430-year bond 105-64/256 2.6208 0.017YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 29.40 5.4030-year vs 5-year yield 77.70 6.05

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 4.25 0.25

spread

U.S. 3-year dollar swap 1.50 0.00

spread

U.S. 5-year dollar swap 0.50 0.25

spread

U.S. 10-year dollar swap -2.50 1.00

spread

U.S. 30-year dollar swap -28.50 0.00

spread

(Reporting by Richard Leong Editing by Chizu Nomiyama and David Gregorio)