U.S. Treasury yields hovered around the unchanged mark on Wednesday in low-volume afternoon trading as the market focused on the government's jobs report due out on Friday. The benchmark 10-year yield, which rose as high as 1.334%, was last unchanged at 1.302%.

The market is in check "because even if you had a really great idea about what's going to happen next, the jobs report can trump just about anything," said Jim Vogel, senior rates strategist at FHN Financial. August job gains above 500,000 should keep the U.S. Federal Reserve on track to announce or strongly signal at its September meeting plans to taper $120 billion in monthly purchases of Treasuries and mortgage-backed securities, a Citi Research report said.

Economists surveyed by Reuters forecast private payrolls likely increased by 700,000 in August from a 703,000 rise in July. With government jobs expected to have risen by about 50,000, that would mean overall payrolls advancing by 750,000.

Yields eased earlier on Wednesday after the ADP National Employment report showed private payrolls increased by 374,000 jobs last month. Economists polled by Reuters had forecast private payrolls would increase by 613,000 jobs in the report, which has been an unreliable indicator of labor market health.

Still, Brian Nick, chief investment strategist at Nuveen, said movements in Eurodollar futures and the 10-year Treasury Inflation-Protected Securities yield and breakeven rate in the wake of the report were "a market signal for maybe the economy is not so strong and the Fed is going to be able to stay on hold for a while longer."

Other data on Wednesday showed U.S. manufacturing activity picked up in August, but a measure of employment in factories dropped to a nine-month low. The U.S. federal funds rate fell 2 basis points to 6 basis points on Tuesday for the first time since June on month-end demand as money market funds and other investors struggled with a dearth of high-quality short-term assets.

Money Market Fund Shortage

Demand for money market assets has increased as the Treasury issues fewer bills as it approaches a debt limit that expired in July.|

There's a lot of cash in the front-end, and that rate is starting to get a little bit slippery," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York, noting growing market pressure as the U.S. government gets closer to potentially running out of funds. The Treasury is expected to get by until late October or early November by using extraordinary measures.

The five-year note yield, which is more sensitive to intermediate interest rate hikes, was last up almost a basis point at 0.7804%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last less than a basis point flatter at 108.89 basis points. The gap between five-year notes and 30-year bonds also contracted. It was last 1.39 basis points flatter at 113.69 basis points. Vogel said Tuesday's curve steepening appeared to be situational as opposed to driven by strong conviction.