(Adds references to Waller and jobs report) By Ross Kerber Aug 2 (Reuters) - U.S. Treasury yields fell on Monday as a soft manufacturing report and the spread of the coronavirus Delta variant raised questions about economic growth. The benchmark 10-year Treasury yield was down 5.5 basis points at 1.1839% in afternoon trading, extending a pattern of declines playing out since the spring. The yield touched 1.151%, the lowest since July 20, shortly after an Institute for Supply Management report showed July U.S. manufacturing growth slowed for the second straight month. The ISM report reinforced the idea that growth might have peaked, said Jim Barnes, director of fixed income for Bryn Mawr Trust, driving investors into safe havens. "It"s the theme where supply constraints may be constraining economic growth." Barnes said investors also sought safety as U.S. COVID-19 cases surged with the highly infectious Delta variant, particularly in areas with lower vaccination rates, which threatens more economic disruption. The 10-year yield did tick up briefly late in the session after Federal Reserve Governor Christopher Waller said on CNBC that the Fed could announce in September it would start reducing its bond purchases in October, if the next two monthly jobs reports each show employment rising by 800,000 to 1 million, as he expects. The closely watched July payrolls data will be released on Friday. Analysts polled by Reuters expect on average that nonfarm payrolls rose by 880,000, after rising 850,000 in June. The yield on 10-year Treasury Inflation Protected Securities was -1.180% after reaching as low as -1.214%, its latest record trough. The 10-year TIPS break-even inflation rate slipped to 2.365%, indicating the market was pricing in a slightly lower inflation rate than on Friday. Demand for Treasuries rose as major stock indexes erased initial gains. Traders had focused on higher anticipated infrastructure spending and strong second-quarter earnings, before the manufacturing data and public health concerns took over sentiment. On Monday afternoon the U.S. Treasury said it planned to borrow $673 billion in the third quarter, less than the May estimate of $821 billion, due to its higher balance at the beginning of the quarter and lower outlays. The government"s two-year debt ceiling suspension expired on Saturday, though it is expected to be able to get by until October or later by using extraordinary measures. These may include suspending some investments and security issuance. A closely watched part of the yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, also moved lower. It was 101 basis points, about 3 basis points below Friday"s close. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 1.2 basis points at 0.1761%. August 2 Monday 3:27PM New York / 1927 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0475 0.0482 0.002 Six-month bills 0.0525 0.0532 0.000 Two-year note 99-230/256 0.1761 -0.012 Three-year note 100-38/256 0.3244 -0.024 Five-year note 99-212/256 0.6601 -0.043 Seven-year note 100-72/256 0.9583 -0.054 10-year note 104-16/256 1.1839 -0.055 20-year bond 108-12/256 1.7662 -0.043 30-year bond 111-188/256 1.86 -0.034 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.75 0.25 spread U.S. 3-year dollar swap 11.75 -0.50 spread U.S. 5-year dollar swap 8.75 0.00 spread U.S. 10-year dollar swap 2.75 0.50 spread U.S. 30-year dollar swap -25.00 -0.50 spread (Reporting by Ross Kerber in Boston and Alden Bentley in New York; Editing by Dan Grebler, Richard Chang and Chris Reese) Our Standards: The Thomson Reuters Trust Principles.