TREASURIES-Yields lower as investors await spending details

Aug 2 (Reuters) - Traders sent U.S. Treasury yields lower on Monday as they positioned ahead of government funding plans and watched for further details on infrastructure spending.

The benchmark 10-year yield was down 3.5 basis points at 1.2039% in morning trading, continuing a pattern of declines playing out since the spring.

Analysts said the bond-buying reflects worries about the pace of economic recovery as the COVID-19 pandemic continues. Jim Vogel, interest rate strategist for FHN Financial, said the trading Monday indicated concerns that consumer spending may not be enough to sustain economic growth.

"We have really strong consumption growth but on a net basis, adjusted for inflation, it may not be as strong in real terms as people are forecasting," Vogel said.

The yield on 10-year Treasury Inflation Protected Securities

was at -1.186% after reaching as low as -1.189%, its latest record low, as investors priced in higher inflation expectations.

The demand for Treasuries came despite higher equity markets on Monday on anticipation of infrastructure spending and strong second-quarter earnings.

U.S. manufacturing continued to grow in July, though the pace slowed for the second straight month as spending rotates back to services from goods and shortages of raw materials persist.

Traders will learn some context later on Monday when the Treasury announces its funding plans for the third quarter. The government’s two-year debt ceiling suspension will expire on Saturday, though it is expected to be able to get by until October or later by using extraordinary measures. These may include suspending some investments and security issuance.

The trading sent lower a closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes , seen as an indicator of economic expectations. It was 102 basis points, about a basis point lower than Friday's close.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 1.2 basis points at 0.1761%.

(Reporting by Ross Kerber in Boston; Editing by Andrea Ricci)