* U.S. service sector growth, expected to slow, instead quickens Nonfarm payrolls on Friday could be hard to parse because of shutdown
* U.S. Treasury quarterly refunding announcement due Wednesday
NEW YORK, Nov 5 (Reuters) - Prices for U.S. Treasuries fell on Tuesday, with stronger-than-expected U.S. service sector data suggesting the world's biggest economy may have weathered last month's partial government shutdown better than feared. U.S. service-sector business activity picked up in October, with the Institute for Supply Management's services index up to 55.4 last month despite expectations by economists for a dip to 54. A reading above 50 indicates expansion. "We got an extra nudge higher in yield after the data beat expectations," said Kim Rupert, managing director of fixed income analysis at Action Economics in San Francisco. Notably, the employment index rose to 56.2, bringing it closer to the six-month peak hit in August. Along with other recent data surprising to the upside, that could suggest "the economy has held up quite well," Rupert said, despite a federal government shutdown in the first half of October. Economists have fretted the shutdown would drag on growth but manufacturing data last week proved stronger than expected. The U.S. service sector figures came after data earlier in the day showed Britain's services sector expanded at its fastest rate since May 1997 last month. The U.S. Federal Reserve is watching for signs of a stronger economy, with an eye to paring back its $85-billion-per-month bond-buying program. The question of that timing has now become central for the Treasuries market. Despite expectations for a September taper, the central bank has instead held firm to its course, although it did take on a more hawkish tinge after its most recent policy meeting last month. "It's just to taper or not to taper," said Wilmer Stith, portfolio manager of the Wilmington Broad Market Bond Fund. "At the end of each day, that's going to be the primary focus." Fed Chairman Ben Bernanke has repeatedly said that the Fed's decision will depend on data showing the health of the world's biggest economy. Other recent Fed speakers have emphasized that message, with three separate Fed officials on Monday suggesting the Fed should only pull back asset purchases on clearer signs of improvement in the economy and should act slowly when it does slow bond buys. Perhaps the most significant upcoming data point for potential policy changes will be Friday's nonfarm payrolls report for October. But that data itself will be problematic, considering that a Congressional impasse shut down most of the federal government for the first half of last month. A weak number, noted Ian Lyngen, senior government bond strategist at CRT Capital Group, "will simply be dismissed as the transitory influence of the government shutdown and civilian furloughs; but on the other hand, if the release comes in above consensus, it will be read as that much stronger given the weight of the shutdown." Fed policymakers want to see the unemployment rate dropping closer to 6.5 percent from the current 7.2 percent, but economists in a Reuters survey expect that rate to have edged up in October to 7.3 percent. Prices for U.S. benchmark 10-year Treasury notes fell 18/32 in price on Tuesday to yield 2.668 percent, compared to a yield of 2.6035 percent late on Monday. The U.S. 30-year bond dipped 1-02/32 in price to yield 3.750 percent, compared to a yield of 3.6943 percent late on Monday. The U.S. Treasury on Wednesday will issue its quarterly refunding announcement, which will lay out upcoming funding needs. As part of its ongoing stimulus program, the Fed on Tuesday bought $1.565 billion of Treasuries maturing between February 2036 and February 2043.