Treasuries pared losses as congressional leaders prepared a vote to raise the U.S. debt limit, curtailing the risk of a default and encouraging demand for U.S. debt.

Yields on two-year debt touched the lowest level since July 19. Ten-year notes earlier fell the most in more than one week after lawmakers approved a debt plan yesterday and President Barack Obama announced the pact on television in Washington. The U.S. economy added fewer-than-average jobs this month, a report Aug. 5 is forecast to show.

"Everything comes down to the vote," said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities Inc. in New York. "Nobody knows whether the vote will go through. The economy is still slow and people are still very nervous."

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