Bond prices up on weak stocks before Wednesday's Fed decision

NEW YORK: US Treasury prices gained on Monday as weak stocks boosted demand for the low-risk debt ahead of Wednesday's conclusion of the Federal Reserve's two-day meeting at which the US central bank is widely expected to raise interest rates.

US stocks slid 1 percent on Monday, weighed down by the retail and health sectors.

Turbulent stock markets and slowing international growth have raised speculation that the Fed needs to pause its tightening cycle or risk harming the US economy.

With a rate hike this week seen as all but certain, investors will be focusing on the Fed's outlook and how many rate increases are likely next year.

"The ball is rolling towards dovish expectations even after they do the hike," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee.

Strong US data may, however, make the US central bank less likely to adopt the more dovish tone that many investors are expecting.

"The odds that people are going to be disappointed are really fairly high, because it really was just three months ago that the Fed said, 'You know, we probably need to get a little bit more hawkish than we have been,'" Vogel said.

In September when the Fed last raised interest rates, it forecast at least three more years of US economic growth.

Fed Chairman Jerome Powell also said in October that the key interest rate was probably still a "long way" from a so-called neutral level and that the Fed might even tighten policy beyond that, before saying last month that the policy rate was "just below" neutral.

Benchmark 10-year notes gained 9/32 in price to yield 2.859 percent. The yields have fallen from a seven-year high of 3.261 percent on Oct. 9.

The closely watched yield curve between two-year and 10-year notes was last at 16 basis points, after shrinking to less than 10 basis points earlier this month for the first time since the financial crisis.

An inversion of the two-year, 10-year yield curve would be viewed as a signal that a recession is likely to occur around 18 to 24 months later.

US President Donald Trump said on Monday it is "incredible" that the Fed "is even considering" raising rates again. He has previously said that continued rate hikes may harm US economic growth.