* Treasury to sell $35 billion two-year notes * Investors waiting for FOMC meeting next week * July payrolls report due next week, key for Fed By Luciana Lopez NEW YORK, July 23 Prices for U.S. Treasuries fell on Tuesday ahead of a sale of $35 billion in two-year notes, the first of $99 billion in new intermediate-dated debt supply this week, with investors waiting for a Federal Reserve meeting next week for key policy clues. With little U.S. economic data on the agenda this week, analysts said investors are watching the Treasury debt sales. "The broader economic story is taking a back-seat to the supply and demand dynamic - at least over the next few sessions," said David Ader, senior government bond strategist at CRT Capital Group in Stamford, Connecticut. Yields have slipped this month as Fed Chairman Ben Bernanke and other central bank officials have underscored that any plans to slow an $85-billion-per-month asset purchase program depend on the economic data out of the world's biggest economy. Recently Fed officials have also emphasized that the bank will hold benchmark interest rates at record low levels for a long time to come, even when the bank starts to pull back on bond buying. Most economists continue to expect that the Fed will begin to reduce its bond buys in September, according to a Reuters poll, even though some market participants pushed back their expectations to later in the year. Next week's July U.S. payrolls report will be the next major economic catalyst that is likely to give signs over the timing of a Fed pullback. It is due for release on Friday, Aug. 2. Policymakers want to see the unemployment rate closer to 6.5 percent than its current 7.6 percent. More direction could also come after the Federal Open Market Committee meets on July 30 and 31. A statement will be released on the second day. "The FOMC's statement needs to confirm the message Bernanke has been repeating for the last several weeks - gradualism, caution, slow to raise rates in 2015," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. "Any equivocation on those points will send rates higher, possibly to 2.65 percent again as the Fed's communication strategy would be laid bare as nearly a random series of events," he added. Benchmark 10-year notes traded 6/32 lower in price to yield 2.505 percent on Tuesday, down from a two-year high of 2.76 percent on July 8 but well up from 1.60 percent at the beginning of May. As part of its stimulus program, aimed at boosting employment, the Fed on Tuesday bought $3.687 billion of Treasuries maturing between August 2019 and June 2020. Uncertainty over the Fed's time frame could add pressure to this week's sales of five-year and seven-year debt. The notes are the most sensitive to interest rate policy. The Treasury will sell $35 billion in two-year notes on Tuesday, $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday.