By Sunny Oh

Treasury prices cut earlier losses on Monday, pushing yields slightly lower, after stocks fell sharply, pushing investors into haven assets like government bonds.

The market turmoil comes as investors gear up for a Federal Reserve policy meeting this week that's seen as virtually certain to deliver a rate increase at the conclusion of its policy gathering on Wednesday.

How are Treasurys doing?

The 10-year Treasury note yield fell 0.4 basis point to 2.844%. The 2-year note yield, the most sensitive to interest-rate expectations, was up by 0.8 basis point to 2.303%. The 30-year bond rate was flat at 3.078%.

Bond prices move in the opposite direction of yields.

What's driving Treasurys?

Treasurys rebounded after stocks sold off (http://www.marketwatch.com/story/dow-futures-slide-more-than-100-points-as-facebook-fall-leads-us-stocks-lower-2018-03-19). After questions about how Facebook Inc.(FB) managed user data, tech shares saw selling, with the Nasdaq down by around 2%. Bonds, on the other hand, attracted haven-related buying as investors sought shelter in U.S. government paper.

See: Facebook's 7% drop puts it on pace for worst daily decline in more than 5 years (http://www.marketwatch.com/story/facebooks-nearly-6-drop-puts-it-on-pace-for-worst-daily-decline-in-about-2-years-2018-03-19)

A lack of economic data ahead of Wednesday's policy meeting will keep investors focused on the Fed. This will be the first meeting chaired by Jerome Powell since he succeeded Janet Yellen at the helm of the central bank in early February. He will also hold his first news conference as chairman.

Read: 5 things to watch from the Fed decision (http://www.marketwatch.com/story/5-things-to-watch-from-the-fed-decision-2018-03-19)

The policy statement will also be accompanied by the so-called dot plot, an aggregate of policy makers' forecasts for future interest rates. Analysts consider a quarter percentage point hike a near-certainty, with the futures market pricing in the increase to 100%.

Also check out: What to expect from the new Fed dot plot on interest rates (http://www.marketwatch.com/story/what-to-expect-from-the-new-fed-dot-plot-on-interest-rates-2018-03-16)

Once the Fed's portfolio-cutting measures reaches its full stride, analysts at the Council on Foreign Relations estimated the bond market will have to absorb long-dated Treasury issuance worth 5% of GDP every year. Concerns that this removal of monetary accommodation will remove a backstop on falling bond prices have kept a few investors on edge.

What did market participants say?

"As the Fed's balance sheet continues to shrink at an increasing rate, the Treasury Department is flooding the front-end of the market with supply, and credit spreads are edging higher (albeit off extremely low levels), the specter of more meaningful fallout from the 'gradual' removal of accommodation looms," said Ian Lyngen and Aaron Kohli, fixed-income strategists at MarketWatch.

"While we do not expect significant changes in the statement, there is a possibility that the Fed hints at a more hawkish balance-of-risks, perhaps by gesturing toward potential overheating as a concern. A more explicit hawkish shift in the FOMC's outlook will more likely be transmitted via the economic projections, which should show higher growth in 2018 and 2019, and perhaps higher core PCE inflation in 2018," said Credit Suisse strategists, led by Praveen Korapaty.

What else is on investors' radar?

The European Union agreed Monday on terms (http://www.marketwatch.com/story/eu-agrees-on-two-year-brexit-transition-deal-2018-03-19) of Britain's two-year transition deal after leaving the bloc in March 2019, according to an EU official familiar with the discussions. The decision will give British lawmakers 21 months to complete their terms of exit.

The European Central Bank is beginning to start discussions on the rate increase path as even the doves on the Executive Board, its policy-making committee, have accepted its bond-buying program should end this year, Reuters reported (https://www.reuters.com/article/us-ecb-policy/ecb-debate-shifting-to-interest-rate-path-from-qe-sources-idUSKBN1GV1DT).

What other assets are on the move?

The yield for the British 10-year government bond was up 1.1 basis point to 1.446%. The German 10-year bond yield was mostly flat at 0.567%.

(END) Dow Jones Newswires

March 19, 2018 15:59 ET (19:59 GMT)