ADP Employer Services' report on private employment overshadowed optimism on cash-strapped Greece about a deal to obtain fresh aid from the European Union and the International Monetary Fund.

US companies added 38,000 jobs in May, ADP said, far below the 175,000 increase predicted by analysts polled by Reuters. The April increase was revised down to a 177,000 from the originally reported 179,000.

"This continues to confirm that the labor market is going to be slow to recover and we are in a soft patch within the economy. Treasuries should remain well bid into Friday's payroll number," said Sean Simko, senior portfolio manager at SEI in Oaks, Pennsylvania.

The disappointing job reading from ADP will likely cause some economists to cut their forecasts on the Labor Department's May payroll survey to be released at 8:30 a.m. (1230 GMT) on Friday.

The latest median forecast on the government's May payroll reading is a 180,000 increase, down from April's 244,000 gain, according to economists polled by Reuters before Wednesday's ADP report.

In the wake of the ADP figures, traders will receive the latest snapshots on national manufacturing from the Institute for Supply Management, construction spending from the government and May sales from vehicle makers later Wednesday.

The price on benchmark 10-year notes last traded up 10/32 from its 3 p.m. close on Tuesday.

Their yield was last at 3.01 percent, a level not seen since early December. On Tuesday, it ended at 3.05 percent, a key resistance level that had held in the previous four sessions.

Copyright Reuters, 2011