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UPDATE 1-Investment funds buy record amount of U.S. 2-year, 5-year notes

(New throughout, adds background)

NEW YORK, Feb 7 (Reuters) - Investment managers purchased record amounts of U.S. two-year and five-year Treasury notes at auctions in late January on strong demand for short-dated bonds, U.S. Treasury Department data released on Thursday showed.

Investors have scarfed up short-dated U.S. debt on the view the Federal Reserve might pause with its interest rate increases in 2019. Some bet the U.S. central bank might even cut interest rates by the end of 2019 to combat slowing economic growth.

Traders favor short-dated Treasuries over longer-dated issues in anticipation possible rate cuts from the Fed.

Fund managers bought $22.253 billion of the $40 billion in two-year government notes sold on Jan. 28. This is the biggest purchase by this group of investors at an auction since this allotment data series began in 2002.

A day later, they purchased a record $24.177 billion of five-year Treasuries. This compared with $16.728 billion they bought in late December.

However, fund managers scaled back their purchases of seven-year Treasury supply on Jan. 29. The Treasury awarded $19.384 billion to them, less than the record amount of $20.817 billion a month earlier.

Heavy domestic demand resulted in smaller auction allotments of two-year and five-year Treasuries to foreign investors, another major group of holders of U.S. government debt,

Last month, overseas accounts bought $5.732 billion of the latest two-year supply, the lowest total since September and down from the $7.024 billion they purchased in late December, Treasury's auction allotment data showed.

Foreign investors purchases $5.407 billion of the latest five-year supply, down the $7.802 billion they purchased the previous month.

On the other hand, they bought $6.611 billion of seven-year Treasuries, up from the $4.398 billion they purchased the prior month. (Reporting by Richard Leong; Editing by David Gregorio)