(Updated at 9:30 EST)

By Karen Brettell

March 8 (Reuters) - U.S. Treasury yields fell in choppy

trading after data on Friday showed that employers added more

jobs than anticipated in February though the unemployment rate

also unexpectedly rose.

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.

"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.

Federal Reserve is likely to begin cutting interest rates.

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

cutting rates by June to 78%, from 74% on Thursday, 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.

Benchmark 10-year yields were last down 2 basis

points on the day at 4.073%. They got as low as 4.038%, the

lowest since Feb. 2.

Two-year yields fell 1 basis point to 4.444% 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 five basis points to minus 37 basis

points.