TREASURIES-Prices narrowly weaker as traders await Fed

* Fed statement awaited, seen holding rates near zero

* No tweak seen to Fed's "extended period" low-rate pledge

* Losses halved after weaker-than-forecast ISM index

* Treasury to sell $81 billion in notes, bonds next week (Updates after ISM non-manufacturing index)

By Ellen Freilich

NEW YORK, Nov 4 (Reuters) - U.S. government securities prices slipped as traders prepared themselves for next week's Treasury refunding and for the Federal Reserve's statement on monetary policy later on Wednesday.

Dealers must make room for new supply that will arrive next week. The Treasury said earlier on Wednesday it would sell $40 billion in three-year notes, $25 billion in 10-year notes, and $16 billion in 30-year bonds next Monday, Tuesday and Thursday, respectively.

Investors often move to cheapen Treasuries prices ahead of such auctions.

Treasuries halved losses after the Institute of Supply Management said its monthly overall reading on the non-manufacturing sector was weaker than forecast.

The benchmark U.S. 10-year Treasury note US10YT=RR was down 12/32 in price before the report, but down just 6/32 afterwards. Its yield was 3.50 percent, still up from 3.47 percent late on Tuesday.

Thirty-year bonds US30YT=RR, down 22/32 before the ISM report, were down just 8/32 afterwards, yielding 4.35 percent versus 4.33 percent on Tuesday.

The U.S. service sector grew in October for the second consecutive month but at a slower pace than forecast, according to the Institute for Supply Management's report. The non-manufacturing index eased to 50.6 last month from 50.9 in September, below economists' median forecast for a rise to 51.5. The line between growth and contraction is 50.

ATTENTION SHIFTS TO FED

With the session's economic reports behind it, the market had little to do but wait for the statement the Fed's Federal Open Market Committee will release at the end of its two-day policy meeting on Wednesday afternoon.

Traders said trading would be confined to a tight range before the Fed's statement is released around 2:15 p.m. ET (1915 GMT).

Analysts said with underlying inflation pressures waning and most Fed officials expecting economic recovery to be slow, there is little incentive for the Fed -- the U.S. central bank -- to tighten monetary policy.

Analysts also said it is too soon for the Fed to even hint toward an exit from ultra-loose policy by tweaking its pledge to keep rates extraordinarily low for an "extended period."

Most analysts at top U.S. banks expect the FOMC to keep rates on hold until mid-2010 or later, though interest-rate futures markets are pricing in an increase early in 2010.

William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida, said despite some improved data in the housing and industrial sectors, the economic recovery process was "tenuous" and would be hurt by tighter monetary policy.

"If there's any hint from the Fed that they want to withdraw liquidity, it will be received very negatively by both the marketplace and the business community," he said.

The most significant outcomes of the Fed's last two policy meetings concerned its purchases of U.S. government and mortgage-related debt.

The Fed stopped buying longer-term Treasury debt last week, while the mortgage-related asset purchase program has been extended into early 2010 to allow for an orderly winding down.

Earlier, the ADP report on private employment said 203,000 jobs were lost in the U.S. private sector in October, more than the Reuters forecast for a loss of 190,000 jobs, but the fewest number of jobs lost since July 2008.

Treasuries shaved some losses on that news.

The most influential U.S. economic report this week is the October nonfarm payroll report due Friday.

The median of forecasts from economists polled by Reuters is for payrolls to have contracted by 175,000 after narrowing by 263,000 jobs in September.

Two-year notes US2YT=RR were down 1/32, their yields rising to 0.94 percent from 0.93 percent on Tuesday. Five-year Treasury notes US5YT=RR were down 2/32 in price, their yields rising to 2.37 percent from 2.36 percent late on Tuesday. (Editing by Chizu Nomiyama )