(Updated at 1500 EST)

By Karen Brettell

March 8 (Reuters) -

Benchmark 10-year U.S. Treasury yields fell to one-month

lows after data on Friday showed employers added more jobs than

anticipated in February, though weak underlying details boosted

expectations that the Federal Reserve is getting closer to

cutting interest rates.

The yields moved higher later on Friday, however, as

traders prepared for supply next week and closed positions ahead

of the weekend.

Nonfarm payrolls increased by 275,000 jobs last month, above

economists' expectations for 200,000 jobs gains. The

unemployment rate rose to 3.9% in February after holding at 3.7%

for three straight months.

Average hourly earnings edged up 0.1% last month after

gaining 0.5% in January. That lowered the year-on-year increase

in wages to a still-high 4.3% in February from 4.4% in January.

"The headline number was pretty strong but behind the data

there wasn't much strength," said John Luke Tyner, fixed income

analyst and portfolio manager at Aptus Capital Advisors in

Fairhope, Alabama.

The report also showed sizable downward revisions to

employment gains over the past two months.

"All in all I'd say this is a pretty good report for the Fed

as far as wanting to see rate cuts sooner. I think it maybe

debunks a little bit the narrative of the reacceleration that

we've seen the last couple of weeks," Tyner said.

Unexpectedly strong jobs and inflation reports in January

raised concerns that there could be a renewed bout of higher

inflation that could push back the timing on when the U.S. Fed

is likely to begin cutting interest rates.

Traders raised bets that the U.S. central bank will begin

cutting rates by June to 80% after the jobs report, but this

later eased to 73%, according to the CME Group's FedWatch Tool.

Consumer price inflation data for February due on Tuesday

will be the next major U.S. economic release to offer fresh

clues on likely Fed policy.

The Fed is expected to hold rates steady when it meets on

March 19-20 but investors will watch for any changes in Fed

policymakers' interest rate and economic projections.

Benchmark 10-year yields were steady on the day

at 4.090%. They got as low as 4.038%, the lowest since Feb. 2.

Two-year yields fell 2 basis points to 4.486% and

earlier reached 4.409%, the lowest since Feb. 7. The inversion

in the yield curve between two-year and 10-year notes

narrowed by two basis points to minus 40 basis

points.

Preparation for $117 billion in new coupon-bearing supply

next week helped yields come off their lows.

This will include $56 billion in three-year notes on Monday,

$39 billion in 10-year notes on Tuesday and $22 billion in

30-year bonds on Wednesday.

The amount banks and fund managers lent to the Fed in

its reverse repurchase agreement facility edged up to $444.80

billion on Friday.