TREASURIES-Bonds hold tight as auction offsets services data

* Economic fears keep market well bid

* 10-year TIPS reopening sees solid demand

* ISM services boost tempers Treasuries

(Recasts with auction results, updates prices)

By Pedro Nicolaci da Costa

NEW YORK, Oct 5 (Reuters) - Treasury debt prices held steady on Monday as a well-received auction and lingering economic concerns mitigated the drag from an improved reading of service activity in the U.S. economy.

A negative perception of the labor market and doubts over the prospects for a robust recovery continued to support government bonds following dismal jobs data last week.

"The fears over the economic situation still predominate," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.

Such concerns prevented investors from getting out of the Treasury market despite solid gains in riskier assets like U.S. stocks. Benchmark 10-year notes US10YT=RR were flat and yielding 3.22 percent, even as the S&P 500 climbed more than 1.3 percent.

There was also solid demand for an auction of $7 billion in reopened 10-year Treasury Inflation-Protected Securities, or TIPS. The notes were met with bids for 3.12 times the amount of debt on offer, matching a best-ever showing in 1999.

Indirect bids, a loose proxy of foreign demand, totaled an above-average 43 percent.

Such solid results reaffirm interest in the overall market, offsetting the drag from a better-than-expected Institute of Supply Management services report. The group's non-manufacturing index rose to 50.9 from 48.4, above a forecast of 50.0 from a poll of economists. For details see [ID:nN05400003]

Still, the survey confirmed the prospects for renewed hiring remain slim, with the employment reading rising marginally but staying deep in contraction territory.

Next on the market's calendar is $39 billion worth of three-year notes on Tuesday, $20 billion of reopened conventional 10-year notes on Wednesday and $12 billion worth of reopened 30-year bonds on Thursday.

Recent auctions have done surprisingly well, helped by strong appetite for U.S. government bonds from overseas.

Analysts said the only negative for the bond auctions was that they look expensive at current levels. (Additional reporting by Burton Frierson; Editing by Padraic Cassidy)