Updates to afternoon New York trading

By Chuck Mikolajczak

NEW YORK, July 1 (Reuters) - U.S. Treasury yields climbed on Wednesday to kick off July but pulled back from earlier levels after a round of economic data and comments from Federal Reserve Chairman Kevin Warsh.

Speaking on a panel of central bankers in Sintra, Portugal, Warsh said inflation expectations and inflation risks have come down in recent weeks, but repeated the Fed would stick closely to its 2% inflation target and "disappoint" anyone who expects loose monetary policy.

"Warsh got the job and the supposition was there that he got the job because he would cut interest rates, but the other sound bite was that the Fed had failed to achieve on inflation, and so the fear factor came in that he was going to raise rates aggressively," said Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income in Newark, New Jersey.

"The fact of the matter is, though, you're getting a lot of signals in a lot of different directions, and the market is not sure what to run with."

The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB rose 5.5 basis points, on track for its biggest daily gain since June 22, to 4.477%, after earlier hitting a high of 4.501% before Warsh spoke, its highest since June 24.

PRIVATE PAYROLLS MISS ESTIMATES

Yields had begun to pare gains after the ADP National Employment Report showed private employment rose by 98,000 jobs last month, below the 118,000 estimate of economists polled by Reuters, after an unrevised gain of 122,000 in May.

Investors will eye the key government payrolls data on Thursday for more clues on the health of the labor market. U.S. markets are closed on Friday for the Independence Day holiday on July 4.

The yield on the 30-year bond US30YT=TWEB jumped 6.6 basis points to 4.969%.

MANUFACTURING ACTIVITY SLOWS

A separate report from the Institute for Supply Management showed its manufacturing PMI slipped to 53.3 last month from 54.0 in May, above the 50 threshold that signals expansion but below the 54.0 estimate. The survey's prices paid for inputs measure dropped to a still-elevated 73.0 from 82.1 in May.

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 30.9 basis points.

Several Fed officials had flagged concerns about inflation remaining elevated in recent days.

Yields have been declining in recent days until this week, as expectations of easing inflation pressures have grown with a decline in oil prices, offsetting what was seen as a hawkish Federal Reserve policy announcement and press conference by Warsh on June 17.

The two-year US2YT=TWEB U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, gained 2.7 basis points to 4.166% after hitting a one-week high of 4.1991% earlier in the day.

Expectations for a rate hike of at least 25 basis points at the Fed's July meeting dipped to 27.3%, down from 33.1% in the prior session, according to CME FedWatch, with markets now pricing in a 64.8% chance for a hike at the September meeting, down from 67.8% on Tuesday.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) US5YTIP=TWEB was last at 2.281% after closing at 2.262% on Tuesday.

The 10-year TIPS breakeven rate US10YTIP=TWEB was last at 2.241%, indicating the market sees inflation averaging about 2.2% a year for the next decade.