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TREASURIES-Ten-year yield lowest since 2016 after U.S. manufacturing contracts

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NEW YORK, Sept 3 (Reuters) - U.S. Treasury yields fell on Tuesday morning, with the benchmark 10-year yield at its lowest since July 2016 after manufacturing data released showed that the U.S. factory sector contracted for the first time since 2016 amid worries about a weakening global economy and rising trade tensions between China and the United States.

The Institute for Supply Management (ISM) said its index of national factory activity decreased to 49.1, the lowest level since January 2016. This compared with a figure of 51.2 in July. Analysts polled by Reuters had forecast a reading of 51.1 for August.

Across maturities, yields fell. The 10-year yield was down 6.2 basis points, last at 1.4456%. The two-year yield was last down 6.2 basis points to 1.4440%. The fall was greater in shorter-dated maturities, steepening the yield curve slightly, though it remained inverted. (Reporting by Kate Duguid Editing by Chizu Nomiyama)