(Adds record in reverse repo facility, fresh prices) By Herbert Lash NEW YORK, Sept 20 - U.S. Treasury yields fell on Monday as fears that property developer China Evergrande Group might default deepened a global equity sell-off and spurred investors to buy safe-haven bonds. Treasury prices rallied, pushing yields on the benchmark 10-year note down 6.4 basis points to 1.3057% as the main stock indexes on Wall Street fell more than 2%. Shares in Hong Kong-listed Evergrande plunged as much as 19% to more than 11-year lows, raising concerns about the health of China"s economy and the potential impact on other markets. Evergrande has been scrambling to raise funds to pay its lenders, suppliers and investors, with regulators warning that its $305 billion of liabilities could spark broader risks to the financial system if not stabilized. Bond prices rose and their yields fell further as stocks sold off, but the reaction in Treasuries was still muted as bond traders already were positioned for a sell-off, Jim Vogel, interest rate strategist at FHN Financial in Memphis, said. The 10-year yield on Friday hit two-month highs as investors anticipated major central banks would start providing clues about tapering during a busy week for policy-setters, including the Federal Reserve"s two-day meeting starting Tuesday. "A lot of people that are not yet willing to buy in front of the FOMC on Wednesday. It just seems like a low payoff event because if you think about it, what could send rates fundamentally lower from here?" Vogel said. "There"s possible upside in buying today, particularly if China comes back ... to support its markets overnight," he said. "Then you"ve got some downside risk to committing here today." Tom Simons, money market economist at Jefferies LLC, said the severity of risk that Evergrande poses may be overblown as many people outside of China were unfamiliar with the company"s problems before last week. "Evergrande, frankly, to me feels more like a topic of conservation than a salient market risk," Simons said. "At the end of the day, China is not going to allow this to spiral out of control." The 30-year Treasury bond yield dropped 6.6 basis points to 1.8444%. Analysts expect the Fed to open the door to reducing its monthly bond purchases while tying any actual change to U.S. job growth. "In order to get a November announcement, there probably needs to be a hint of that in the statement that’s coming out this week," Simons said. The Fed"s reverse repo facility, which offers approved money managers the option to lend money overnight to the U.S. central bank in return for Treasury collateral, set a record $1.224 trillion on Monday. Borrowing rates in the overnight repurchase agreement market were at five basis points. A record amount in the reverse repo speaks to an abundance of cash in bank coffers with nowhere to go. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 108.8 basis points. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 1 basis points at 0.216%. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.482%. The 10-year TIPS breakeven rate was last at 2.305%, indicating the market sees inflation averaging about 2.31% a year for the next decade. September 20 Monday 2:37PM New York / 1837 GMT Price Current Net Yield % Change (bps) Three-month bills 0.03 0.0304 -0.008 Six-month bills 0.045 0.0456 0.000 Two-year note 99-211/256 0.2158 -0.010 Three-year note 99-198/256 0.4515 -0.021 Five-year note 99-172/256 0.8179 -0.048 Seven-year note 100-30/256 1.1074 -0.060 10-year note 99-124/256 1.3057 -0.064 20-year bond 99-88/256 1.7893 -0.067 30-year bond 103-152/256 1.8431 -0.067 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.00 0.25 spread U.S. 3-year dollar swap 11.75 -0.25 spread U.S. 5-year dollar swap 10.25 -0.25 spread U.S. 10-year dollar swap 3.25 -0.75 spread U.S. 30-year dollar swap -24.00 -1.00 spread (Reporting by Herbert Lash, additional reporting by Stefano Rebaudo in London; Editing by Dhara Ranasinghe, Lisa Shumaker and Alexander Smith)