* Treasury's $8 bln, 10-yr TIPS sale draws robust demand

* Stronger-than-expected ISM services data hits long end

* Fed buys $7 bln in debt maturing in 2014 to 2016 (Updates market with late New York trade)

By Burton Frierson

NEW YORK, July 6 (Reuters) - Longer-dated U.S. Treasury debt prices fell on Monday as government debt auctions raised supply concerns and a surprisingly strong report on the services industry revived hopes of an economic rebound later this year.

A report showed the U.S. service sector was still shrinking last month, but the pace of contraction slowed and activity was at its highest since September 2008. [ID:nN06492915]

The data reinforced the view that recovery was taking hold, however slowly. This supported shorter-dated debt on the notion that the Federal Reserve is likely hold rates steady for now, keeping two-year yields at one-month lows.

It raised inflation risks for longer-date bonds while supply worries also weighed. The government is bringing $73 billion worth of bonds to market this week, though the auctions kicked off on Monday with a well-received sale of Treasury Inflation-Protected Securities.

"Really, the overriding factor for the market-place is supply," said Tom di Galoma, head of fixed income rates trading at Guggenheim Capital Markets LLC, a New York-based brokerage.