U.S. government debt advanced a second day, the first two- day gain this month, as the U.S. producer-price index was unchanged in August. Equities fell as a report showed foreign direct investment in China last month recorded the first back- to-back decline of more than 10 percent since 2009. U.S. 10-year yields touched the highest level since July yesterday on speculation the Fed will indicate it's moving closer to raising interest rates.

“This week is about the Fed and Scotland — everything else is a side show to the big show,” said David Ader, head of U.S. government-bond strategy at CRT Capital Group LLC in Stamford, Connecticut. “Most certainly we had over oversold conditions. They reversed.”

The U.S. 10-year yield dropped two basis points, or 0.02 percentage point, to 2.57 percent at 9:01 a.m. in New York, according to Bloomberg Bond Trader data. The 2.375 percent note due August 2024 rose 1/8, or $1.25 per $1,000 face amount, to 98 9/32.