TREASURIES-US Treasury yields dip as Trump's tariff plan fuels recession fears

By Chuck Mikolajczak

NEW YORK, March 31 (Reuters) - U.S. Treasury yields were lower on Monday, with the benchmark 10-year yield poised for its third straight monthly decline, as President Donald Trump's upcoming tariffs deadline stoked recession concerns and fueled risk-off sentiment.

Trump said on Sunday that reciprocal tariffs he is set to announce this week will include all nations, not just a smaller group of 10 to 15 countries with the biggest trade imbalances.

He has promised to unveil a massive tariff plan on Wednesday, which he has dubbed "Liberation Day". He has already imposed tariffs on aluminum, steel and autos, along with increased tariffs on all goods from China.

Goldman Sachs raised the probability of a U.S. recession to 35% from 20%, said it expects three consecutive interest rate cuts by the Federal Reserve beginning in July, and reduced its GDP growth view to 1.5% from 2% for 2025.

"It's been for the most part, consistent on how trading has been for this year, risk-on, risk-off being driven by whatever the headline news is on tariffs," said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania.

"The issue is when there's uncertainty around what the path is, then it just leads to just risk-off as investors head to the sidelines because it's hard to position accordingly in that type of environment, and that's really what you're seeing."

The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB fell 4 basis points to 4.215%.

Yields have been moving lower and U.S. equities have been under pressure in recent weeks as tariff rhetoric has unnerved consumers, with recent sentiment data showing a notable weakening and expectations for higher inflation growing.

On Friday, data showed U.S. consumer spending rebounded less than expected in February while a measure of underlying prices increased by the most in 13 months.

The yield on the 30-year bond US30YT=TWEB fell 4.3 basis points to 4.589%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=TWEB, seen as an indicator of economic expectations, was at a positive 33.6 basis points.

The two-year US2YT=TWEB U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 3.1 basis points to 3.879% and is also on track for a third straight monthly fall.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) US5YTIP=TWEB was last at 2.666% after closing at 2.623% on March 28.

The 10-year TIPS breakeven rate US10YTIP=TWEB was last at 2.388%, indicating the market sees inflation averaging about 2.4% a year for the next decade.