TREASURIES-Prices fall before key data on manufacturing, jobs
* ISM manufacturing survey due at 1400 GMT, main index forecast at 50.5
* U.S. payrolls data due Friday
* Economists estimate 165,000 new jobs added in June
* Bond funds have seen huge outflows
NEW YORK, July 1 (Reuters) - U.S. Treasuries prices slipped on Monday, the first day of a new quarter, sending yields up ahead of key data on manufacturing and on the labor market due this week and as investors prepared for the day when the Federal Reserve would start buying fewer bonds. The market is focused on key economic reports due this week including the Institute for Supply Management (ISM) manufacturing report due at 10 a.m. (1400 GMT) on Monday and the highly influential monthly U.S. employment report due Friday. The ISM manufacturing index is expected to read 50.5 for June, up from 49.0 in May, according to economists polled by Reuters. A reading above 50 points to expansion; readings below 50 point to contraction. Economists polled by Reuters estimated U.S. payrolls added just 165,000 new jobs in June, after adding 175,000 jobs in May. "Investors are looking to lighten up heading into Friday's employment report, but opportunities to rebalance are limited," said Thomas Simons, money market economist at Jefferies & Co. in New York. "Trading will be thin in the middle of the week with the (U.S. Independence Day) holiday." "We will be looking to sell upticks in Treasuries throughout the week and we will be putting on spread wideners," Simons said. "We are also bearish on 10-year TIPS both because of the fund outflows and because of supply coming up shortly." Yields rose to two-year highs last quarter, the worst period since 2012 for Treasuries as measured by the iShares Barclays 20-year-plus exchange-traded fund, a popular bond ETF, which fell about 6.5 percent in the quarter, its worst drop since the first quarter of 2012. The slump in U.S. Treasury prices began in May, gaining momentum when Fed Chairman Ben Bernanke suggested that the U.S. central bank could be looking for an exit from its bond-buying stimulus program. The selloff intensified when Bernanke emphasized that the Fed could slow its purchases this year as the economy improves. The benchmark 10-year U.S. Treasury note's yield rose to 2.53 percent on Monday, up from 2.49 percent Friday, but below the 22-month high of 2.67 percent reached last Monday. But the yield is higher than the 2.20 percent area it traded at before Bernanke's comments, and well above the 1.60 percent level where it stood at the beginning of May. Bond funds have struggled in recent weeks. Investors in funds based in the United States pulled $8.62 billion out of taxable bond funds in the latest week, marking the first four-week streak of outflows since 2008, data from Thomson Reuters' Lipper service showed on Thursday. Richmond Fed President Jeffrey Lacker said Friday markets would be volatile as investors absorbed news that the Fed will pull back bond buying later this year. He said that was a normal adjustment that should not derail growth.
(Editing by Chizu Nomiyama)