* February payrolls report seals view on U.S. rate hike next week * Some traders hoped for stellar job gain after ADP data * Wage growth rebounds but falls short of expectations * Reports on talk of rate hike at ECB briefly pressured bonds (Updates market action, adds quote) By Richard Leong NEW YORK, March 10 (Reuters) - U.S. Treasury yields fell on Friday, with benchmark yields receding from 12-week highs after data on domestic hiring last month came in stronger than consensus forecasts but fell short of the most optimistic views.
Still the latest jobs figures were solid enough to cement expectations the Federal Reserve will raise interest rates next Wednesday at its two-day policy meeting, analysts and investors said.
"The Fed will move next week. That's baked in the cake. This report did nothing to dissuade that," said John Bredemus, vice president at Allianz Investment Management in Minneapolis.
U.S. employers added 235,000 workers in February, beating the 190,000 hiring forecast among analysts polled by Reuters. However, there had been expectations of an even stronger figure following a report from payroll processor ADP on Wednesday that showed a 298,000 increase in private sector jobs.
Wage growth also missed forecasts, rising 0.2 percent versus an expected 0.3 percent increase.
"We are not overheating from a wage perspective," said Jim Caron, portfolio manager at Morgan Stanley Investment Management in New York.
Caron said it would be tough for longer-dated yields to rise much from current levels if wage growth remains muted.
In choppy trading, benchmark 10-year Treasury yields were last at 2.578 percent, down 2.0 basis points from late on Thursday. They rose to 2.624 percent earlier on Friday, a level last seen in mid-December, Reuters data showed.
The 10-year yield rose more than 25 basis points in two weeks for the biggest such increase since November following Donald Trump's presidential win.
The two-year yield, which is most sensitive to traders' views on Fed policy, was down nearly 1 basis point at 1.364 percent. It reached 1.388 percent earlier on Friday, which was its highest since August 2009.
The two-year yield increased for a second straight week, rising 5 basis points.
Interest rates futures implied traders saw a 93 percent chance the U.S. central bank would raise rates by a quarter point to 0.75-1.00 percent next week, up from 89 percent on Thursday, CME Group's FedWatch program showed.
Bond yields rose briefly following a Bloomberg report the European Central Bank policymakers discussed whether to raise interest rates before they wrap up their bond purchase program.
But they resumed their decline after Reuters reported such a move did not enjoy broad support.
March 10 Friday 3:21PM New York / 2021 GMT Price US T BONDS JUN7 146-28/32 0-2/32 10YR TNotes JUN7 123 0-44/256 Price Current Net Yield % Change (bps) Three-month bills 0.735 0.7465 0.012 Six-month bills 0.8775 0.8936 0.011 Two-year note 99-140/256 1.3594 -0.012 Three-year note 99-224/256 1.6679 -0.016 Five-year note 98-236/256 2.1048 -0.020 Seven-year note 98-60/256 2.4018 -0.019 10-year note 97-28/256 2.5818 -0.016 30-year bond 96-196/256 3.168 -0.015 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 33.50 0.25 spread U.S. 3-year dollar swap 25.50 1.00 spread U.S. 5-year dollar swap 10.00 1.00 spread U.S. 10-year dollar swap -2.75 1.00 spread U.S. 30-year dollar swap -38.00 1.00 spread (Reporting by Richard Leong; Editing by Meredith Mazzilli and Richard Chang)