Sept. 3 (Bloomberg) -- Treasuries fell, with 10-year notes snapping a four-day advance, as the U.S. said it would sell $70 billion in 3-, 10- and 30-year debt next week and investors prepared for tomorrow’s jobs report. U.S. government debt declined even as first-time claims for jobless benefits fell to 570,000 last week, more than forecast, from a revised 574,000 the previous week. The Labor Department may report tomorrow that the unemployment rate rose to 9.5 percent in August after dipping the month before, according to a Bloomberg News survey. “Today is all about position squaring ahead of tomorrow’s employment data and next week’s supply,” said Martin Mitchell, head of government-bond trading at the Baltimore unit of Stifel Nicolaus & Co. “We are seeing some of the ‘longs’ liquidate after we tested July’s highs recently.” The yield on the 10-year note rose three basis points, or 0.02 percentage point, to 3.33 percent at 11:04 a.m. in New York, according to BGCantor Market Data. The rate touched 3.28 percent yesterday, the lowest level since July 13. The 3.625 percent security maturing in August 2019 dropped 1/4, or $2.50 per $1,000 face amount, to 102 13/32. Notes pared losses as U.S. stocks fluctuated after a report on service industries failed to boost optimism that the economic recovery will be strong enough to justify a six-month rally in equities. The Standard & Poor’s 500 Index was little changed after rising as much as 0.7 percent The U.S. lost 230,000 jobs in August, compared with 247,000 in the previous month, according the median estimate of 79 economists surveyed by Bloomberg. The Labor Department will report the figures at 8:30 a.m. in Washington tomorrow. Short Bias “Given the amount of strength that we have seen in the Treasury market over the past few weeks, our bias would be to be short going into the numbers,” said Ajay Rajadhyaksha, head of U.S. fixed-income strategy in New York at Barclays Plc, one of the 18 primary dealers required to bid at Treasury auctions. “If the employment data comes in weaker than expected, then I don’t think there is lot more strength to be had given the rally, but if it comes in stronger than expected, rates will give back a lot of its recent gains.” A short position is a bet that the price of an asset will decline. Yields on 10-year notes have fallen as much as 60 basis points since Aug. 7, when they touched 3.88 percent after American employers cut fewer jobs than forecast in July and the unemployment rate fell to 9.4 percent. Next week’s sales of $38 billion in 3-year notes, $20 billion in debt maturing in 10 years and $12 billion in 30-year bonds is less than the $75 billion the last time these maturities were sold a month ago. President Barack Obama has increased the size of the U.S. publicly traded debt to a record $6.78 trillion as he borrows to spur the economy. ‘More Dominant’ The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 48.4, exceeding forecasts and the highest level in 11 months, from 46.4 in July, according to the Tempe, Arizona-based group. Readings below 50 signal contraction. Philadelphia Federal Reserve Bank President Charles Plosser said policy makers may need to raise the benchmark U.S. interest rate “aggressively” to avert inflation as growth revives. “Over the course of the next few months, I expect the good news to become more dominant and I’m looking for good growth in the second half of this year,” Plosser said yesterday in an interview with CNBC television. He does not vote on monetary policy this year. The Fed cut its target for overnight loans between banks to a range of zero to 0.25 percent in December to combat the steepest U.S. recession since the 1930s. Bumpy Recovery European Central Bank President Jean-Claude Trichet said the euro region’s recovery will be bumpy and signaled officials are in no rush to withdraw emergency stimulus. “Today it isn’t time to exit,” Trichet said at a press conference in Frankfurt after policy makers kept the benchmark rate at a record low of 1 percent. He echoed comments made yesterday by Treasury Secretary Timothy Geithner, who said it’s too early to remove policies aimed at boosting growth. Treasuries gained yesterday as Bill Gross, co-chief investment officer at Pacific Investment Management Co., said intermediate- to long-term bonds will perform well as long as policy rates and inflation remain low. Gross, who runs the world’s biggest bond fund from the company in Newport Beach, California, spoke in an interview with CNBC. Fed officials discussed extending their purchases of mortgage bonds at a meeting last month, the minutes of the session showed yesterday. Credit Markets The central bank is buying $1.25 trillion of agency mortgage-backed securities and $200 billion of agency debt under a program to cap consumer borrowing costs that is scheduled to end in December. Officials also discussed including adjustable- rate mortgages in their purchases, the minutes showed. The Fed also is purchasing as much as $300 billion of Treasuries under a program it began in March and plans to finish in October. Yields indicate its efforts are working. The extra yield three-month Libor offers over the overnight indexed swap rate, the so-called Libor-OIS spread, narrowed to 16 basis points, the least in two years. A shrinking spread indicates banks are more willing to lend to each other. To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net.

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