(Bloomberg News) Treasury notes rose for the first time in four days as U.S. job growth slowed more than forecast, fueling bets the Federal Reserve may start a third round of debt buying next week under the quantitative-easing stimulus tactic.

The benchmark 10-year note reversed earlier losses, paring a weekly decline, as a report showed U.S. employers added 96,000 positions in August, versus a revised 141,000 increase the previous month. Fed Chairman Ben S. Bernanke, who has vowed to hold the key interest rate at virtually zero until late 2014, said last week unemployment was of "grave concern."

"The bottom line is the Fed has a smoking gun now," said Richard Schlanger, who helps invest $20 billion in fixed-income securities as vice president at Pioneer Investments in Boston. "The question is, when are they going to pull the trigger?"

The benchmark 10-year yield declined four basis points, or 0.04 percentage point, to 1.64 percent at 12:57 p.m. in New York. It touched 1.74 percent, the highest level since Aug. 22, before the jobs data. The price of the 1.625 percent note due in August 2022 increased 10/32, or $3.13 per $1,000 face amount, to 99 27/32. The yield has increased 10 basis points this week.

Thirty-year bond yields fell as much as seven basis points to 2.73 percent before trading little changed at 2.79 percent. Because of their long maturity, long bonds are more sensitive to inflation than shorter-term U.S. government securities.

European Program

Treasuries fell yesterday as risk appetite swelled when the European Central Bank announced a program to buy euro-area government bonds to contain the region's debt crisis.

The U.S. jobless rate decreased to 8.1 percent, staying above 8 percent for a 43rd month. Economists in a Bloomberg News survey had forecast the report would show the U.S. added 130,000 jobs, versus a previously announced 163,000 in July, and that the jobless rate remained at 8.3 percent.

"We are seeing modest job growth that isn't sufficient to keep up with population growth," said Jay Mueller, who manages about $3 billion of bonds at Wells Capital Management in Milwaukee. "The weak data makes the Fed more likely to attempt quantitative easing. The central bank in Europe is becoming pretty expansive, and the Fed is getting closer to jumping on that bandwagon."

Fed policy makers are scheduled to meet Sept. 12-13.