(Updates yields, adds Treasury announcement, analyst comments) By Karen Pierog CHICAGO, May 3 (Reuters) - U.S. Treasury yields fell on Monday after data showed manufacturing activity growth slowed in April amid supply chain challenges and rising demand fueled by the COVID-19 vaccine rollout and fiscal stimulus. Yields ticked a little higher later in the session when the Treasury Department projected much-larger borrowing plans for the second quarter. The benchmark 10-year yield, which hit a session low of 1.578%, was last down 3 basis points at 1.6011%, holding well below a 14-month high of 1.776% reached on March 30. The Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 60.7 last month after surging to 64.7 in March, which was the highest level since December 1983. Economists polled by Reuters had forecast the index would edge up to 65 in April. Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York, said the headline number drove yields lower. "I"m not really sure this is something the market should be significantly focusing on," he said. "Overall, the data"s been showing the recovery in some ways is taking hold." Friday’s employment report for April is expected to show strong labor market improvement. "I don"t think it would be detrimental to Treasuries to any great extent. A million (in jobs gains) is pretty much priced (into the market)," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco. The U.S. Treasury said on Monday it plans to borrow $463 billion in the second quarter, assuming an end-of-June cash balance of $800 billion, as spending increases in response to the pandemic. That is nearly five times bigger than its February estimate of $95 billion, which preceded the March enactment of the $1.9 trillion American Rescue Plan. Borrowing of $821 billion is expected in the July to September quarter, assuming an end-of-September cash balance of $750 billion. On Wednesday, second quarter refunding details, including anticipated auction sizes for each maturity of notes and bonds, will be announced. Analysts expect no changes in those sizes. In remarks on Monday, Federal Reserve Chair Jerome Powell said the U.S. economy is doing better but is "not out of the woods yet." The two-year Treasury yield, which typically moves in step with interest rate expectations, was last unchanged at 0.1624%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last 2.48 points flatter at 143.70 basis points. Meanwhile, the effective fed funds rate on April 30 fell to 0.05%, its lowest level since June 2020, which could lead the Fed to adjust the current 0.1% rate on excess reserves (IOER). That rate, along with the overnight reverse repurchase rate, helps the Fed keep the federal funds rate within the central bank"s target range, which was cut to between zero and 0.25% at the start of the pandemic last year. Historically, the IOER tends to be adjusted when the fed funds rate comes within 5 basis points of the upper or lower bound of the target range. May 3 Monday 4:12PM New York / 2012 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0125 0.0127 0.000 Six-month bills 0.035 0.0355 0.011 Two-year note 99-237/256 0.1624 0.000 Three-year note 100-40/256 0.3217 -0.016 Five-year note 99-160/256 0.8269 -0.029 Seven-year note 99-200/256 1.2828 -0.035 10-year note 95-180/256 1.6011 -0.030 20-year bond 95-92/256 2.1645 -0.016 30-year bond 91-44/256 2.2852 -0.015 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.25 -0.50 spread U.S. 3-year dollar swap 14.00 0.00 spread U.S. 5-year dollar swap 9.50 0.00 spread U.S. 10-year dollar swap -0.25 -0.25 spread U.S. 30-year dollar swap -26.50 -0.75 spread (Reporting by Karen Pierog; Editing by Andrea Ricci and Jonathan Oatis)