* Demand robust for U.S. Treasury 6-month bills
* ECB rate cut bets remain after EU summit outcome
* Rate cut expectations based on weakening economy
By Ellen Freilich
NEW YORK, July 2 (Reuters) - Demand for three-month bills the U.S. Treasury sold on Monday was in line with bidding over the last three months but demand for six-month bills was more robust than usual.
Treasury sold $30 billion in three-month bills at a high rate of 0.10 percent, awarding 12.35 percent of the bids at the high. The value of bids received over those accepted was 4.68.
The $27 billion in six-month bills were sold at a high rate of 0.15 percent with 51.35 percent of the bids at the high. The ratio of bids received over those accepted was 4.82.
"Today's six-month auction drew the most robust bid in several months from the buyside perhaps due to the January 3 maturity date, which bridges year-end," said Thomas Simons, money market economist at Jefferies & Co in New York.
Perhaps the dour Institute of Supply Management report on U.S. manufacturing was constructive for purchases of short-term bills, but Simons said demand from money market funds was the biggest factor keeping bill rates low.
"Money funds need to keep their weighted average maturity and weighted average life at certain levels so they continue to buy bills and keep rates well below the 25 basis points interest rate on excess reserves," he said.
Meanwhile, money markets expect the European Central Bank to cut interest rates this week as the euro zone economy struggles after policy action from last week's European Union summit provided only short-lived relief to volatile sovereign debt markets.
Early Monday, Spanish and Italian debt yields fell after euro zone leaders last week surprised markets by agreeing on steps to curb the debt crisis. But eight hours later, the fall in Spanish debt yields lost steam amid concern over potential hurdles to implementation and uncertain global growth.
"The U.S. fiscal 'cliff,' and Europe and the implications of China's new five-year plan to re-orient their economy all throw assumptions into some kind of flux," said Jerry Webman, chief economist at OppenheimerFunds.
In Europe, France sold a 51-week Treasury bill at a record low yield at a short-term debt auction on Monday, indicating demand amid concerns about the euro zone's debt crisis ease.
France has seen borrowing costs fall in recent weeks to historic lows as investors seek the relative safety of French debt with the promise of richer yields than offered on German bonds.
Forty-eight of 71 analysts polled by Reuters expect the ECB will trim interest rates on Thursday, with most predicting a 25-basis-point cut to 0.75 percent, where they will stay until 2014 at least.
The survey was taken before European leaders decided on a more flexible use of euro zone rescue fund last week, but given recent economic data and rhetoric from ECB policymakers, analysts are still betting on more monetary easing.
"Now the markets will look less to the leaders of the big European countries for direction and more to the European Central Bank which will come out with a statement on Thursday," said James Barnes, senior fixed income portfolio manager at National Penn Investors Trust Company in Wyomissing, Pa.
What ECB President Mario Draghi says, whether about possible bond purchases or another long-term refinancing operation (LTRO) "can add to the good news that came out of the summit last week and add more clarity so that the market has a better idea of what to expect going forward," Barnes said.
After euro zone leaders made some headway at last week's summit, the "European Central Bank will applaud that and be more open to taking some action on their end," Barnes said.
European leaders decided last week that euro zone rescue funds could be used to stabilize bond markets without extra austerity measures and recapitalize banks directly without increasing the country's budget deficit.
Goldman Sachs analyst Francesco Garzarelli said ECB policies have reduced the risk of a liquidity shortfall.
"Investors have 'learned' that the size of policymakers' response will be commensurate to the degree of stress in funding markets," he wrote in a note on Monday.
Three-month Euribor rates inched lower on Monday to 0.652 percent from 0.653 percent. That was within range of a record low of 0.634 percent hit in early 2010.