UPDATE 1-US CDS index tightens 6 pct after jobs data-Markit

(Adds comment, corporate bond reaction)

NEW YORK, June 5 (Reuters) - The cost of insuring U.S. corporate debt with credit default swaps fell sharply on Friday after the government reported an unexpectedly small decline in nonfarm payrolls.

The main index of investment-grade credit default swaps tightened about 6 percent to 116 basis points from about 123 basis points on Thursday, according to data from Markit Intraday.

While the news is unlikely to affect the dollar price of U.S. corporate bonds, spreads are set to tighten as U.S. Treasury debt prices plunge and yields rise, said Bob Gorham, managing director and head of investment-grade bond trading at Broadpoint Capital in New York.

"I think the market is going to take this news as very constructive and we'll have pretty good tone" set for Friday's trading session, said Gorham.

U.S. employers cut 345,000 jobs last month, the fewest since September and far fewer than the 520,000 forecast. For details click on [ID:nN04486858]. (Reporting by Dena Aubin and Tom Ryan; Editing by James Dalgleish)