Bond yields get jobs boost

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NEW YORK (CNNMoney) -- A slight uptick in optimism ahead of Friday's big jobs report nudged Treasury yields higher on Thursday.

Worries about the labor market and the European debt crisis have anchored yields around the 3% mark for months. But yields could break out of this range if the government's closely watched employment data indicates a strong improvement in the labor market.

And given the better-than-expected reports on jobless claims and private-sector hiring released Thursday, it's looking increasingly likely that an upside surprise may be in store, said Richard Bryant, head of Treasury trading at MF Global.

"Prior to this week, expectations were for a jobs report on the weaker side, but this week there has been more optimism and economists have been revising their forecasts for Friday's report as we see other reports like ADP come out," said Bryant.

The government's monthly jobs report will be released Friday morning. Jobs growth has been weaker than expected in recent months, so economists and traders had been expecting similar results from June's report.

Economists surveyed by CNNMoney are expecting the report to show 120,000 jobs added to payrolls.

On Thursday, a weekly report on initial jobless claims showed that the number of Americans filing for first-time unemployment benefits eased more than expected. Separately, a report from payroll services firm ADP showed that employers in the private sector added 157,000 workers in June, far exceeding expectations.

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A better-than-expected jobs report on Friday, combined with an improving eurozone debt situation and the completion of the Fed's bond-purchasing spree, are all likely to play into an imminent rise in yields, he said.

While the benchmark 10-year yield was about 2.85% at the end of June, the yield was a solid 3.2% on Thursday. That's also up from 3.09% on Wednesday.

Bryant said he wouldn't be surprised to see the upward trend continue for the remainder of the year -- with a positive jobs report bumping the 10-year yield up to 3.3% on Friday. By the end of the year, the 10-year yield could even reach 3.5% if the labor market continues to improve, he said.