(Updates at 1600 GMT)

By Harry Robertson and Stefano Rebaudo

March 8 (Reuters) - Shorter-dated euro zone bond yields

fell on Friday after mixed signals from U.S. jobs data, with

payrolls rising but a slowdown in wage growth and a rise in

unemployment suggesting the Federal Reserve is dealing with a

cooling labour market.

The closely watched jobs numbers showed the U.S. added

275,000 jobs in February, compared with 229,000 in January, a

figure that was revised considerably lower.

Average earnings grew just 0.1% month-on-month, less than

expected, while the unemployment rate rose to 3.9% from 3.7% in

January.

Germany's 2-year bond yield, which is sensitive

to rate expectations, was last down 7 basis points (bps) at

2.735%, from 2.76% before the data. Yields move inversely to

prices.

The German 10-year yield, the benchmark for the

euro zone, initially fell but was last 3 bps lower at 2.263% on

Friday, roughly where it stood before the jobs figures.

"The big concern was that we were seeing a reacceleration in

both the economy and inflation in January, that was somewhat

kicked off by the NFP (non-farm payroll) numbers in January,"

said Jamie Niven, senior portfolio manager at Candriam.

"So to see that being, let's be honest, revised quite

substantially downwards is probably a relief for the market...

hence why we're seeing particularly the front-end rallying."

Shorter-dated U.S. Treasury yields also fell,

down around 5 bps on the 2-year note at 4.463%.

Bond markets have become highly correlated in recent months,

with investors expecting the world's biggest central banks to

cut interest rates at around the same time.

The U.S. data came a day after the European Central Bank

kept borrowing costs at record highs at its policy meeting while

cautiously laying the ground to lower them later this year,

saying it had made good progress in bringing down inflation.

Analysts said the ECB was growing in confidence that it

could cut and send a strong signal for June, while the new

inflation projections were on track to reach 2%.

Italy's 10-year government bond yield was 3 bps

lower at 3.571%.

The spread over Germany's 10-year yield - a

gauge of the risk premium investors ask to hold bonds of the

euro area's most indebted countries - stood at 129 bps. It hit

128.8 bps the day before, its lowest level since January 2022.

French central bank chief Francois Villeroy de Galhau,

considered a centrist on the ECB's rate-setting Governing

Council, said on Friday that interest rates would be lowered

this spring, adding that "spring is from April until June 21".

The bank's next two monetary policy meetings are on April 11

and June 6.

ECB euro short-term rate (ESTR) forwards last fully priced

in a first rate cut by June, having seen a 98% chance of before

the U.S. data and after the ECB.

They currently price around 102 bps of rate cuts in 2024.

;))