* Euro zone yields start August with fall after July tumble
* PMI survey shows robust factory orders
* Analysts say U.S. rates market to give direction
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
LONDON, Aug 2 (Reuters) - Germany's 30-year government borrowing costs fell below 0% on Monday, taking the entire yield curve back into negative territory for the first time since early February as euro debt markets tracked another leg lower in U.S. Treasury yields.
The bond rally came after the Institute for Supply Management said U.S. manufacturing grew in July at a slower pace for the second straight month, reinforcing the idea that economic growth had peaked.
That sent ten-year Treasury yields to a July 20 low of 1.184%, reversing earlier moves higher that were driven by optimism about more U.S. fiscal stimulus and improving equity sentiment.
The latest moves continue the rally in July which was the biggest since at least March 2020 across global bond markets, driven by risks from the COVID-19 Delta variant and central bank assurances that a reduction in monetary support was still far off.
Germany's 10-year government bond yield closed at minus 0.48%, down nearly 3 basis points on the day and the lowest since early-February, having already fallen 25 basis points in July.
The notable mover was the 30-year yield which turned negative after almost six months in positive territory and traded marginally sub zero towards the close of trade.
Inflation-adjusted or "real" German 10-year bond yields meanwhile fell to a new record low of minus 1.878%.
The moves appeared at odds with firm economic data which showed German retail sales increasing much more than expected in June, while final euro zone purchasing managers' index (PMI) surveys were better than earlier estimates.
Counteracting that was the European Central Bank's statement that it had bought many more bonds in the last two months than the bloc's top four countries sold. Real yields have fallen nearly 30 bps since the ECB's July 8 strategic review which signalled determination to hit its revised inflation target.
"What really gave the last push to real yields is the ECB strategy review, when they established that the ECB will need to have an inflation symmetric target," said Althea Spinozzi, fixed income strategist at Saxo Bank.
"That implies also that there is a continued commitment from the ECB to guarantee easy financing conditions."
Falling U.S. Treasury yields were adding to pressure, she said, adding: "If U.S. Treasury (yields) were much higher... we would have been talking about a different kind of level."
Tradeweb said on Monday more than 70% of euro zone government bonds on its platform carried negative yields, while more than half investment-grade corporate bond yields were sub-zero.
U.S. market developments are likely to stay in the driving seat for the rest of the week, with jobs data due on Friday. (Reporting by Tommy Wilkes, Sujata Rao and Yoruk Bahceli; Editing by Andrew Heavens)
