(Recasts with auto sales; Adds quotes, data, updates prices)
* Weak auto sales sends yields tumbling
* Treasury to announce refunding schedule on Wednesday
* Friday's employment report in focus
NEW YORK, Aug 1 (Reuters) - U.S. Treasury yields fell on Tuesday as weak auto sales raised concerns about slow economic growth, before Fridays highly anticipated employment report for July. U.S. carmakers said on Tuesday they continued to slash low-margin sales to daily rental fleets in July as General
Motors Co , Ford Motor Co and Fiat Chrysler Automobiles , struggled to curb a slide in
retail sales during the month. Yields had risen before the sales reports. "Weak auto sales really took the air out of bond sellers," said Jim Vogel, an interest rate strategist at FTN Financial in New York.
Benchmark 10-year notes rose 10/32 in price to
yield 2.26 percent, down from 2.29 percent late on Monday. Services and non-manufacturing data on Thursday will be watched for further indications of the strength of the U.S. economy, with the main economic focus on Friday's employment report. The market is in "a holding pattern into payrolls and average hourly earnings on Friday," said Ian Lyngen, head of U.S. interest rate strategy at BMO Capital Markets in New York. Data on Tuesday showed that a measure of U.S. factory activity fell from a near three-year high, setting the economy on a moderate growth path in the third quarter. A separate report showed that inflation remains low. The personal consumption expenditures (PCE) price index, excluding food and energy, rose 0.1 percent in June after a similar gain in May. In the 12 months through June, the so-called core PCE price index increased 1.5 percent after advancing by the same margin in May. The Treasury Department's quarterly refunding announcement on Wednesday will be scrutinized for any indication of how the government plans to make up for a reduction in Federal Reserve bond purchases once the U.S. central bank begins paring them. Investors will also be focused on whether the government plans to introduce a new ultra-long bond, or revive a 20-year issue.
Yields on Treasury bills due on Oct. 5 spiked
on Tuesday on concerns that U.S. lawmakers may not raise the debt ceiling before the government runs out of funds. The Congressional Budget Office has said U.S. lawmakers need to raise the debt ceiling by mid-October to avoid defaulting on debt payments. The Washington Post reported that talks between the White House and the Senates top Republican and Democrat broke up on Tuesday without a resolution to raising the debt limit.
(Editing by Meredith Mazzilli and Grant McCool)