By Ellie Ismailidou, MarketWatch

Meanwhile, jobless claims in the U.S. rose to two-month high

Treasury yields declined Thursday as the head of the European Central Bank emphasized a "willingness" to provide more stimulus if needed, while U.S. investors continued to debate the timing of a possible interest-rate increase by the Federal Reserve.

ECB President Mario Draghi told a news conference that the central bank is committed to maintaining its bond-buying program through September 2016, as scheduled, or "beyond" if necessary.

The central bank is keeping an eye on turmoil in financial markets, concerns about China, and falling oil prices.

"Surely Draghi is behind the [Treasury] bid," David Ader, head of government bond strategy at CRT Capital Group, said in a Thursday note.

Another boost for Treasurys came after the U.S. Labor Department said the number of people that applied for unemployment benefits rose at the end of August to the highest level in two months.

The yield on the benchmark 10-year U.S. Treasury note fell 2.6 basis points to 2.165%. The yield on the two-year note declined by 2.4 basis points to 0.696%. The yield on the 30-year bond slipped 2.2 basis point to 2.943%. Yields and bond prices move in opposite directions.

The jobless-claims report gave investors further hints on the state of the labor market ahead of the closely-watched monthly jobs report due Friday. That in turn could determine whether the data-dependent Federal Reserve could raise interest rates this month for the first time in nearly a decade.

Recent data showed that "the labor market is improving gradually and moderately....but that doesn't give the Treasury market much direction because of the economic slowdown in the rest of the world," said James Kochan, chief fixed-income strategist at Wells Fargo Funds Management.

Ader also recommended "leaning bullishly" on Treasurys, citing among other reasons "leveraging volatility in a mixed portfolio."

In recent days, "volatility generated in other markets simply forced a certain set of positions to unwind [in the Treasury market]," Ader said.

Now investors' eyes are on Friday's jobs report, after Automatic Data Processing Inc. reported a 190,000 increase in private-sector payrolls.

Friday's jobs report should disappoint "the crowd looking for a September rate hike" as ADP "forewarned of potentially weaker data tomorrow," Tom di Galoma, head of rates and credit trading at ED & F Man Capital Markets, said in a note.

"I would consider buying dips as the 10-year and 30-year sell off on any stronger-than-anticipated economic data," di Galoma added.

European government bond yields declined, while stock markets rallied after Draghi appeared committed to the stimulus that brought rates in the eurozone to record lows earlier this year.

The yield on the benchmark German 10-year bund fell 5.7 basis points to 0.734%. The yield has gained about 59 basis points since April 20, when it reached its all-time low at 0.073%.

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(END) Dow Jones Newswires

September 03, 2015 09:52 ET (13:52 GMT)