TREASURIES-Yields slide as US recession worries weigh, Fed cut bets ramp up

SINGAPORE, April 7 (Reuters) - U.S. Treasury yields fell on Monday and the two-year yield sank to a multi-year low as worries of a possible recession in the world's largest economy grew and investors wagered that could see U.S. rates cut as early as May.

Markets were set for another week of turmoil as fears of a global trade war saw Wall Street futures plunge in early Asian trade, sparked huge currency volatility and sent U.S. yields sliding.

The two-year U.S. Treasury yield US2YT=RR, which typically reflects near-term rate expectations, tumbled more than 20 basis points to its lowest level since September 2022 at 3.4350%, as investors ramped up bets of more aggressive Federal Reserve easing this year.

The benchmark 10-year yield US10YT=RR last stood at 3.9158%, languishing near Friday's six-month low of 3.8600%.

Futures now point to nearly 120 bps worth of Fed cuts by December and markets swung to imply a roughly 60% chance the U.S. central bank could ease rates in May, as policymakers seek to shore up growth in the world's largest economy on the back of President Donald Trump's latest tariff salvo. 0#USDIRPR

More than 50 nations have reached out to the White House to begin trade talks since Trump rolled out sweeping new tariffs.

"We don't think the depth of U.S. cut pricing is overdone given the intensification of recession concerns," analysts at Goldman Sachs said in a note.

"Near-term inflation risks have limited the extent to which the market has been able to pull cuts into the very front-end, but growth downside fears dominated the broader tone."

JPMorgan ratcheted up its odds for a U.S. and global recession to 60%, and brokerages elsewhere similarly raised their probability of a U.S. recession as tariff distress threatens to sap business confidence and slow down global growth.

While Fed Chair Jerome Powell on Friday said Trump's tariffs are "larger than expected," and the economic fallout including higher inflation and slower growth likely will be as well, he cautioned it was still too soon to know what the right response from the central bank ought to be.

Elsewhere, the 30-year U.S. Treasury yield US30YT=RR similarly fell to a four-month low of 4.3260%, while the five-year yield US5YT=RR last stood at 3.5786%, languishing near Friday's six-month trough.