TREASURIES-Yields fall as tepid wage growth points to low inflation

* Tepid wage growth eases inflation concerns

* Bonds rally after jobs report

By Karen Brettell

NEW YORK, Feb 3 (Reuters) - U.S. Treasury yields fell on

Friday after a jobs report for January showed disappointing wage

growth, indicating inflation is not rising at a pace that would

lead the Federal Reserve to raise rates in the near-term.

Nonfarm payrolls increased by 227,000 jobs last month, the

largest gain in four months, the Labor Department said.

Average hourly earnings, however, increased only three cents

or 0.1 percent last month. December's wage gain was revised down

to 0.2 percent from the previously reported 0.4 percent

increase.

"Most of the disappointment is really focused around the

inflation pressures that would presumably force the Fed to act,"

said Aaron Kohli, an interest rate strategist at BMO Capital

Markets in New York.

"The whole narrative behind the pressure in rates is you

might get to a situation where labor markets are really tight

and the incremental gain for any additional stimulus would be to

push up wages and trigger inflation. In this case you see that

is likely not materializing," Kohli said.

Benchmark 10-year notes gained 6/32 in price to

yield 2.45 percent, down from a high of 2.49 percent before the

report was released. The yield curve between 5-year notes and

30-year bonds steepened to 119 basis points, the

widest since Dec (Shanghai: 600875.SS - news) . 14.

The Fed on Wednesday said job gains remained solid,

inflation had increased and economic confidence was rising,

although it gave no firm signal on the timing of its next rate

move.

(Editing by Bernadette Baum)