TREASURIES-Bonds gain in safety bid on bailout uncertainty

*Uncertainty drives safety bid in government debt

*Even after Senate passage, House could nix rescue plan

*Bonds add to gains after weekly jobless claims

*Rate futures increase chances of deep October Fed cut

NEW YORK, Oct 2 (Reuters) - U.S. Treasury debt prices rose on Thursday in a safe haven bid, even after the U.S. Senate passed a financial sector rescue plan, as investors remained uncertain whether the House of Representatives would follow suit.

Many analysts now warn that although the $700 billion rescue package is not the panacea that frozen credit markets and battered stocks need, and that it may take time for it to help the embattled global economy, riskier assets could spiral into a steeper selloff if there was not even a partial fix.

Investors' concerns about such dangers buoyed safe harbor government securities prices on Thursday.

"Treasuries right now might be akin to the VIX," said Doug Bender, managing director with McQueen, Ball & Associates in Bethlehem, Pennsylvania, referring to an index of stock market volatility.

"I don't think anyone would argue there is great value in Treasuries as the ultimate safety refuge: they are more a gauge of fear than value," he said.

The benchmark 10-year Treasury note's price, which moves inversely to its yield, rose 7/32 for a yield of 3.71 percent US10YT=RR, versus 3.74 percent late Wednesday.

Treasuries briefly added to gains after U.S. weekly initial jobless claims came in higher than expected, underscoring the deterioration of the labor market on the eve of the government's widely watched monthly non-farm payrolls report.

"People who are already laid off are having a hard time finding a job," said Dana Saporta, economist with Dresdner Kleinwort Securities LLC in New York. "Today's report shows the U.S. labor market is deteriorating," Saporta said.

As market participants weighed the growing risks that the tightening 14-month old global credit squeeze could push the United States and other major economies into a deep recession, U.S. short term interest rate futures showed an increase in the implied chances of a large Federal Reserve rate cut later this month.

Short term interest rate futures raised the perceived chance of a 50 basis-point cut in the fed funds target rate by the late October policy meeting to about a 70 percent chance on Thursday from about 64 percent early on Wednesday.

Shorter government debt maturities respond closely to expectations for official central bank interest rate moves, as well as tapping a safety bid from investors fleeing riskier assets.