* Fears of European recession pushes Spanish yields higher * Treasuries take back Tuesday's QE3-related price losses * Investors expect March U.S. jobs growth in Friday data By Chris Reese NEW YORK, April 5 (Reuters) - U.S. Treasuries prices rose for a second day on Thursday as a resurgence in euro zone debt fears added a safety bid while traders waited for key employment data on Friday. Spain's bond yields rose on Thursday as investors worried about its ability to meet budget targets, a day after an auction of the country's debt saw weak demand. The renewed jitters about Europe boosted demand for safe-haven assets including U.S. Treasuries. "A lot of the focus is back on Europe - yields there are blowing out to some of the highest levels this year - and a lot of that is feeding back into Treasuries and giving us a bid again," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco. Benchmark 10-year Treasuries traded 13/32 higher in price to yield 2.18 percent, down from 2.22 percent late on Wednesday, while 30-year bonds gained 20/32 in price to yield 3.32 percent, down from 3.36 percent late on Wednesday. Treasuries pared price gains after data showed the number of Americans lining up for new jobless benefits fell to the lowest in nearly four years last week. Investors are now focused on Friday's closely watched payroll employment data, which is expected to show that U.S. employers added 203,000 jobs in March, down from 227,000 new jobs in February. Market reaction to payrolls data on Friday may be choppy as trading volumes are expected to decline for the long Easter holiday weekend. The U.S. bond market will open until noon Eastern time (1600 GMT) on Friday. The potential for renewed stress from Europe is leaving some investors hesitant to bet on significant yield increases in Treasuries, even as U.S. data points to a moderate economic recovery. Bearish sentiment on Europe has returned in recent days as economic data in the region has disappointed, raising fears the 17-country euro zone economy is in recession. Investors may reduce exposure in stocks on signs of a worsening situation in Europe after they made strong gains in the first quarter, said Chris Ahrens, interest rate strategist at UBS in Stamford, Connecticut. Declining stocks appetite may boost demand for Treasuries, which had the worst quarter in the first three months of the year since the final quarter of 2010. "The winds appear to have shifted a bit and I think that they will be very quick to move to the sidelines and take some profits and sit back to see how fundamental events play out," Ahrens said. U.S. government bonds have now retraced a selloff seen on Tuesday when investors were disappointed that minutes from a U.S. Federal Reserve meeting did not give indications of further monetary policy easing. Fed Chairman Ben Bernanke said last week that the modest pace of U.S. growth was unlikely to cut unemployment quickly and that further stimulus remains an option.