* U.S. 5-year note auction was decent * Fed seen holding monetary policy steady * U.S. reverse repo volume surges to $927 bln * U.S. 10-year TIPS yields hit record low for 2nd day (Adds comment, reverse repo volume; updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, July 27 (Reuters) - U.S. Treasury yields tumbled on Tuesday as risk appetite languished amid lingering concerns about high inflation and the fast-spreading Delta coronavirus variant that could thwart global economic growth. Investors were also cautious as the Federal Reserve"s two-day monetary policy meeting began on Tuesday. The U.S. central bank is likely to stand pat on monetary policy but could discuss plans for tapering asset purchases during its Jackson Hole, Wyoming, gathering in August, analysts said. "One thing about predicting Fed moves is to separate what you think they will do versus what you think they should do," said Scott Skyrm, executive vice president in fixed income and repo at Curvature Securities in New York. "If we are just looking at "should," I believe it"s time for the Fed to end QE (quantitative easing) purchases. Reverse repo volume is now over $900 billion a day. The liquidity the Fed is providing through QE is just recirculating back to the Fed via RRP," he added, creating distortions in the Treasury market. The Fed"s reverse repo window, launched in 2013, is used to mop up extra cash in the repo market and create a strict floor under its policy rate, or the effective fed funds rate, currently in a target range of 0%-0.25%. The reverse repo volume soared to $927 billion on Tuesday, the second largest usage on record. Volume has surged this month after the Fed in June raised the rate it pays on reverse repos to 0.05% from 0% as part of technical adjustments to keep the fed funds rate from falling too low. Tuesday"s U.S. 5-year note sale, meanwhile, showed decent results overall, but not as strong as initially expected, especially with the Treasuries rally going into the auction. The high yield was 0.710%, slightly below the when-issued or expected rate of 0.711% at the bid deadline. The bid-to-cover ratio, a measure of demand, was 2.36, the same as last month, but below what analysts said was the 2.40 average. The yield on 10-year Treasury Inflation-Protected Securities (TIPS) plunged to a record low of -1.147% for a second straight session as investors bought TIPS on concerns about the prospect of steeper consumer prices going forward. The yield was last at -1.117%. "With the increased uncertainty from China and the Delta variant, the markets are taking a breather from last week"s reversal on rates and equity prices," said Ellis Phifer, managing director of fixed income at Raymond James in Memphis, Tennessee. "Maybe it"s the pause that refreshes." U.S. 10-year yields were on an uptrend for most of last week. In late afternoon trading, the U.S. 10-year Treasury yield slid to 1.239% from 1.276% late on Monday. U.S. 30-year yields dropped to 1.891% from Monday"s 1.925%. Post-auction, U.S. 5-year note yields were down at 0.695% , from Monday"s 0.713%. The U.S. 5-year note has come to reflect market views on Fed monetary policy. July 27 Tuesday 3:36PM New York / 1936 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 0.000 Six-month bills 0.05 0.0507 -0.002 Two-year note 99-215/256 0.2055 -0.010 Three-year note 100-10/256 0.3617 -0.013 Five-year note 100-224/256 0.6939 -0.019 Seven-year note 101-180/256 0.9948 -0.030 10-year note 103-144/256 1.2378 -0.038 20-year bond 107-80/256 1.8089 -0.035 30-year bond 111 1.8904 -0.035 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 6.75 -1.75 spread U.S. 3-year dollar swap 10.75 -0.25 spread U.S. 5-year dollar swap 8.75 0.00 spread U.S. 10-year dollar swap 0.00 0.00 spread U.S. 30-year dollar swap -27.50 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis, Dan Grebler and Richard Chang) Our Standards: The Thomson Reuters Trust Principles.