(Adds Friday's data, updates prices)
* U.S. yields fall with tumbling U.K. bond yields
* ISM non-manufacturing index weakens
* Treasury yield curve flattest in a week
NEW YORK, Aug 3 (Reuters) - U.S. Treasury yields fell to more than one-week lows on Thursday after the Bank of England kept interest rates at a record low and downgraded its economic and inflation forecasts, raising concerns about global economic growth. Investors had begun to price in the chance that the BoE might raise interest rates this month for the first time in a decade. Thursdays decision sent yields on 10-year UK government debt tumbling to their lowest since June 28. Its pretty dovish testimony. They are again walking back policy, said Tom di Galoma, a managing director at Seaport Global Holdings in New York. Weak U.S. non-manufacturing data also boosted bonds. The Institute for Supply Management (ISM) said its non-manufacturing index fell to a reading of 53.9 last month from 57.4 in June. A reading above 50 indicates an expansion in the services sector, which accounts for more than two-thirds of the U.S. economy.
Benchmark U.S. 10-year notes gained 7/32 in
price to yield 2.24 percent, down from 2.26 percent late on Wednesday. Friday's employment report for July is this week's main economic focus. Employers are expected to have added 183,000 jobs in the month, according to the median estimate of 92 economists polled by Reuters. The Treasury yield curve also continued to flatten, a day after the U.S. Treasury Department said it was still considering an ultra long bond but did not announce a new issue. The Treasury gave no timing for when it may make a decision on the bond. It also said it has begun to consider how it will increase debt issuance to make up for a future decline in U.S. Federal Reserve bond purchases. The yield curve between five-year notes and 30-year bonds flattened to 101 basis points, the lowest since July 25. Large block trades in bond futures contracts may have helped boost the long-dated debt. A block of 7,453 contracts was purchased on Treasury bond futures at 7:37 am EDT on Thursday, after a block of 7,483 contracts was bought at 8:52 am EDT on Wednesday, according to data by the CME Group.
(Editing by Bernadette Baum and Steve Orlofsky)