TREASURIES-Prices fall on profit-taking after weak jobs data

* Weak economic data had already fueled bond market gains

* Stock gains deplete bid for safe-haven government debt

* Treasuries rose this week on prospective Fed purchases (Updates comment, prices, changes byline)

By Ellen Freilich

NEW YORK, Dec 5 (Reuters) - U.S. government debt prices fell on Friday as a view that Treasuries were too pricey after a rally that took yields to five-decade lows outweighed a big drop in employment that would ordinarily boost bonds.

A late round of buying in the equity markets further pressured Treasuries prices, depleting some of the safety bid for U.S. government debt.

"The stock market started to look beyond 2009," said Cary Leahey, economist at Decision Economics in New York. "People see a lot going on out there in terms of fiscal and monetary policy so they figure 2010 may not be that bad."

The Labor Department said non-farm payrolls shed more than half a million jobs in November, the steepest monthly decline since December 1974, while the unemployment rate rose to 6.7 percent, evidence of a weak economy that would typically push Treasuries prices up and yields down.

But Treasuries gathered no fresh steam on the report because the market had rallied so much this week on the prospect of the Federal Reserve buying Treasuries, on very weak economic data, and on market "whispers" that many more jobs were lost in November than the commonly cited median forecast of 340,000.

"There was such a strong bid in the Treasury market over the course of the week that a very weak employment number was already priced into Treasuries," said Carl Riccadonna, economist at Deutsche Bank Securities in New York.

One reason bidding was strong for Treasuries this week was that Fed Chairman Ben Bernanke said that the U.S. central bank could purchase "substantial quantities" of longer-term securities issued by the U.S. Treasury or government-sponsored agencies in an effort to lower yields and stimulate demand, Riccadonna said.

"The announcement that quantitative easing is under way and that it will certainly be an important tool for policy-makers over the turn of the year and probably well into 2009 pushed Treasuries prices up," he said.

Despite fairly sharp losses on Friday, bond prices were up sharply on the week and yields, which move inversely to prices, were substantially lower.

Benchmark 10-year Treasury notes US10YT=RR fell nearly 1-1/2 points on Friday, their yields rising to 2.72 percent from 2.56 percent on Thursday, but still down more than 20 basis points from 2.92 percent last Friday.

Thirty-year bonds US30YT=RR, likely beneficiaries of monetary authorities' attempts to ease policy further and to push mortgage rates lower, fell two points in price, their yields rising to 3.13 percent from 3.04 percent on Thursday, but still down from 3.44 percent last Friday.

As for the economic weakness evident in the November employment report, that was well advertised in economic data that investors got earlier in the week, said Michael Moran, chief economist at Daiwa Securities America in New York.