TREASURIES-US yields dip after Trump does not impose tariffs on first day

Adds comments, updates prices

By Ankur Banerjee

SINGAPORE, Jan 21 (Reuters) - U.S. Treasury yields slipped on Tuesday after President Donald Trump did not impose tariffs on his first day in office, but said he was thinking about them, unnerving markets and keeping investors worried about inflation resurfacing.

In his inauguration speech, Trump declared immigration and energy emergencies, but only briefly mentioned tariffs and issued a following memo that just directed agencies to investigate and remedy persistent trade deficits.

The lack of initial firm details on tariffs led to a short-lived relief rally in most currencies, with stock futures also soaring but new comments from Trump jolted the markets. FRX/

Trump said he was thinking of imposing 25% tariffs on imports from Canada and Mexico, starting next month without offering details. Trump also said he wanted to reverse the U.S. trade deficit with the European Union, either with tariffs or more energy exports.

Analysts cautioned that even a measured approach on tariffs could still stoke inflation worries and keep U.S. rates higher for longer.

"The first few hours of Trump administration has underscored that policy environment will be dynamic once again and markets should brace for volatility," said Charu Chanana, chief investment strategist at Saxo.

The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB fell 7.1 basis points to 4.54%. The yield on the 30-year bond US30YT=TWEB fell 5.6 basis points to 4.789%.

The two-year US2YT=TWEB U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 4.4 basis points to 4.228%.

"If you look at what Trump said in his speech, it looks like he's quite firm on tariffs," said Zachary Griffiths, senior investment grade strategist at CreditSights.

"If you have a more gradual, but still large tariffs in terms of percentage on a broad swath of countries ... that could be more challenging from an inflation perspective for the Fed and could even result in policy being tighter for longer," Griffiths said.

The Federal Reserve last month jolted the market by projecting just two rate cuts in 2025, down from four predicted previously, due to worries over inflation and the Trump administration's election pledges.

Analysts have said that Trump's policies on immigration, tax and tariffs will likely boost growth but also be inflationary. The Fed is expected to hold rates steady this month but keep a wary eye on inflation.

The lack of concrete tariff measures turned investors a little more dovish on the U.S. rate outlook. Futures added about 4 basis points of extra Fed easing this year, putting rates at 3.90% by December. 0#USDIRPR

The probability of a quarter-point cut as early as May edged up to around 50%, from 31% a week earlier.

(Reporting by Ankur Banerjee; Editing by Jamie Freed and Christopher Cushing)

((ankur.banerjee@thomsonreuters.com;; Mobile - +65 8121 3925;))