* Prices slip on eve of May employment report
Bonds
* Fed's Bernanke says high unemployment remains a concern
* Treasury to sell $70 bln 3Y, 10Y, 30Y supply next week (Updates comment, market action, changes byline)
By Ellen Freilich
NEW YORK, June 3 (Reuters) - U.S. Treasury debt prices fell on Thursday as the stock market edged higher and traders cut holdings of safe-haven government bonds in anticipation of a robust May payrolls report on Friday.
Stocks were in the minus column for much of the session but crept into positive territory late in the day, and bond prices fell as the safety bid waned and investors took on riskier assets.
"When stocks fell, Treasuries rebounded, and when stocks moved up, Treasuries headed lower, but the bond market's overriding consideration was positioning for Friday's report on May U.S. job growth, which is expected to be quite strong," said John Canavan, analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.
Benchmark 10-year notes US10YT=RR fell 7/32 in price to 101-3/32. Their yield, which moves inversely to price, rose to 3.37 percent, up from 3.34 percent on Wednesday.
Some U.S. labor market data released this week appeared to support expectations for a robust half-a-million increase in jobs in the government's payrolls report due on Friday.
A report from ADP Employer Services on Thursday said U.S. private employers added 55,000 jobs in May and an upwardly revised 65,000 in April. For more, see [ID:nEAP102300]
The Institute for Supply Management reported its labor gauge of U.S. services industries rose, with its employment index at its highest level since December, 2007, while the government said U.S. claims for initial jobless benefits fell moderately last week. [ID:nEAP101300] [ID:nOAT004637]
The median May job growth estimate culled from a Reuters poll of economists was 513,000, after 290,000 new jobs were added to payrolls in April.
"The labor market appears to be on the mend," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. LaVorgna estimated that U.S. non-farm payrolls expanded by 600,000 jobs in May, about two-thirds of which would be due to temporary Census hiring.
His noted his forecast for private sector job creation of 200,000 is actually slightly weaker than April private sector job growth of 231,000.
"Heightened economic concerns last month related to financial market gyrations and sovereign risks may have caused some employers to postpone hiring they might otherwise have done in May," he said.
LaVorgna said the change in private payrolls would matter most to policymakers, and that the Federal Reserve needs to see "a steady string" of monthly payroll gains topping 300,000, excluding temporary Census workers.
Traders said if private sector hiring comes in stronger than people expect, Treasuries could succumb to further selling, especially ahead of new supply next week.
"We would have a reason for equities to run up and bonds to sell off," said Justin Hoogendoorn, managing director of U.S. fixed income at BMO Capital Markets in Chicago.
Still, even as the economy has started to produce new jobs, unemployment is stuck at a high level, which remains a top concern for the Fed policy-makers.
Fed Chairman Ben Bernanke told a small business group in Michigan that the jobless rate, which was at 9.9 percent in April, is a "particularly difficult issue." [ID:nWAL3HE67L]
Benchmark yields touched two-week highs on encouraging jobs data and stocks rose briefly on lessened anxiety over Europe's sovereign debt crisis.
"Players continue to watch the euro as a measure for the broader outlook for the European economy, but it hasn't been doing much for days," Canavan said. "It's near its recent lows, but it has settled into a range in recent days."
Traders also eyed the supply coming to market next week.
The U.S. Treasury said it will sell a combined $70 billion of coupon-bearing securities next week: $36 billion of three-year notes, $2 billion less than in May, as well as reopened issues of 10- and 30-year securities.
The government began paring the auction sizes of shorter-dated debt in May, partly because tax receipts have increased in recent months. (Additional reporting by Richard Leong; Editing by Chizu Nomiyama)
From REUTERS published on Thu Jun 3, 2010 5:09pm EDT