TREASURIES-Long bonds fall before services data, TIPS sale

* Long-end debt slips before data, TIPS auction

* ISM U.S. services index seen improving a bit in June

* Treasury to sell $8 bln in 10Y inflation securities

By Richard Leong

NEW YORK, July 6 (Reuters) - Prices on long-dated U.S. Treasury debt fell on Monday in advance of data on services activity and a $8 billion auction of inflation-protection securities.

Short-dated government notes were mostly unchanged in the wake of surprisingly weak jobs data last Thursday. The data supported the notion the Federal Reserve will leave its near zero interest rate policy alone in the foreseeable future in a bid to end the recession.

"The long-end lagged the move as the street used the steepening move as an assist in helping them to set up for this week's long-end supply," said Marty Mitchell, head of government bond trading at Stifel Nicolaus & Co. in Baltimore.

While there has been evidence its deterioration is slowing, the economy is far from healthy. The manufacturing and services industries are still contracting, albeit at slower rates in recent months.

The Institute for Supply Management will release its June reading on national services activity at 10 a.m. (1400 GMT). The business group's barometer on the services sector likely stepped up to 46.0 in June from 44.0 in May, according to analysts recently polled by Reuters.

Benchmark 10-year Treasury notes US10YT=RR were down 4/32 in price at 96-23/32. Their yield, which moves inversely to their price, was 3.52 percent, up from 3.50 percent on Thursday and below an eight-month high of 4.00 percent hit last month.

The U.S. bond market was closed on Friday in observance of the July 4 Independence Day holiday.

There are few market-moving reports this week so traders will focus on the $73 billion supply of coupon debt.

Monday's $8 billion auction of 10-year Treasury Inflation-Protected Securities (TIPS) will kick off this week's debt auctions.

It is unclear what the demand will be for bonds that offer inflation protection when recent data and Fed officials have suggested price pressures will remain muted into 2010, analysts said.

The TIPS auction will be followed a $35 billion sale of new three-year notes on Tuesday; a $19 billion re-opening of 10-year debt on Wednesday and an $11 billion re-opening of 30-year bonds on Thursday. (Editing by Andrea Ricci)