By Ellen Freilich

NEW YORK, Aug 2 (Reuters) - U.S. Treasuries prices rose on

Friday after weaker-than-expected U.S. job growth in July added

another element of uncertainty as to when the Federal Reserve

would scale back the monetary stimulus it has used to try to

foster economic growth.

Bond traders covered short positions and the 30-year

Treasury bond briefly extended its gain to a full point after

the data showed employers added 162,000 jobs in July, fewer than

economists had expected.

Still, the advance was less than dramatic.

'The payroll data was disappointing, but probably not weak

enough to change the debate about tapering,' said Thomas Simons,

money market economist at Jefferies & Co., referring to the

possibility of the Fed trimming its large-scale bond purchases.

'The market sold off significantly yesterday afternoon so

today's trade is an opportunity to square up,' he said.

Traders said supply from a $72 billion Treasury refunding

next week also restrained the rally. The Treasury will sell

three-, 10- and 30-year coupons next week.

The benchmark 10-year Treasury note rose 22/32.

Its yield eased to 2.63 percent from 2.71 percent on Thursday.

Traders said short-covering contributed to the move up.

Weekly Federal Reserve data on dealer positions showed dealers

short by about 14,000 contracts in the six-to-seven-year range

and short about 6,700 contracts in the seven-to-10-year maturity

range as of July 24.

Traders of short-term U.S. interest-rate futures boosted

bets that the Fed will wait until 2015 before raising short-term

borrowing costs. The contracts, tied to the Fed's policy rate

target, rise in price when traders see a bigger chance of a

later Fed rate hike.

The 'modest slowdown' in July job growth 'will keep alive

the debate about the immediate timing of 'tapering,'' said

Decision Economics senior economist Pierre Ellis.

The pace of hiring in July was below Reuters consensus

estimate of 184,000. The jobless rate fell to 7.4 percent as the

labor market participation rate edged down to 63.4 percent from

63.5 percent in June.

The market rallied on the view that the softer-than-expected

employment report could make the U.S. central bank more cautious

about drawing down its huge economic stimulus program.

But Credit Suisse economist Jay Feldman said the employment

report did not necessarily change the probability of a September

reduction in Fed bond purchases. However, he and others said the

fuzzy signal sent by the payrolls data on that issue put 'a

greater premium' on the next round of numbers.

'The data from here until the September FOMC meeting will be

very important as we are roughly 50/50 whether or not tapering

begins in September, with it very much being a data-dependent

call,' said Eric Stein, co-director of global income at Eaton

Vance Investment Managers in Boston.

The tapering debate will remain at center stage as the bond

market goes 'sideways' from here, said Kevin Giddis, senior

managing director and head of fixed income at Raymond James.

'Investors will play it pretty close to the vest until some real

action occurs.'

Separately, the CME Group said it paused trading in

some Treasuries futures for five seconds on Friday before the

highly anticipated U.S. jobs report for July.

CME spokesman Michael Shore said the firm had 'stop logic

events' in the 10- and 30-year Treasuries futures contracts at

8:29:57 a.m. EDT, three seconds before the employment report was

released.

About 173,000 10-year Treasury contracts traded in the

minute before the jobs report came out, with several large

trades in the seconds before the halts.

The CME's halts generally occur after a number of trades

come in that would cause the contract in question to trade

outside a certain defined range.

LOSING STREAK

Treasuries posted a loss for a third month in a row in July,

falling 0.11 percent, according to a total return index compiled

by Barclays. July's decline was less than the heavy losses

suffered in May and June.

Still, the Barclays Treasuries index fell 2.9 percent during

the three-month span, the most since April-June 2004.

The broader U.S. bond market fared better, earning a 0.14

percent return in July, according to Barclays' Aggregate bond

index. It was still down 2.31 percent so far this year.

(Additional reporting by Karen Brettell in New York and Ann

Saphir in Chicago; Editing by Dan Grebler)

((ellen.freilich@thomsonreuters.com)(+1-646-223-6309)(Reuters

Messaging:

ellen.freilich.thomsonreuters.com@thomsonreuters.net))

Keywords: MARKETS USA BONDS/

(--------------------- MARKET SNAPSHOT AT 1150 EDT (1550 GMT) -------------------- Sept T-Bond 133-13/32 (+1-12/32) Sept 10-Year note 126-10/32 (+30/32) Change vs Current Nyk yield Three-month bills 0.035 (-0.010) 0.035 Six-month bills 0.075 ( unch) 0.076 Two-year note 99-28/32 (+01/32) 0.313 Five-year note 99-30/32 (+16/32) 1.388 10-year note 92-15/32 (+22/32) 2.628 30-year bond 85-00/32 (+23/32) 3.711 )

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