By Daniel Kruger 

U.S. government-bond prices fell Tuesday as investors speculated that the Federal Reserve would continue to emphasize a patient approach to adjusting interest-rate policy as it starts its two-day meeting in Washington.

The yield on the benchmark U.S. government 10-year Treasury note rose for a second consecutive session, settled at 2.614% from 2.605% Monday. Yields rise as bond prices fall.

Government-bond yields remained within 0.1 percentage point of their lows of the year as investors continued to bet that the Fed's next move is more likely to be a reduction of interest rates than an increase.

After a surge in market volatility and concerns that higher interest rates could hasten a recession, Fed officials in January stepped back from their own forecasts at their December meeting that they would raise interest rates two times in 2019 and emphasized that they would be more responsive to economic data, including financial conditions, in setting rates this year.

Yields declined from their session highs after the Commerce Department said Tuesday that orders for U.S. manufactured goods rose 0.1% in January. That matched the prediction of economists surveyed by The Wall Street Journal. However, excluding transportation, orders slid 0.2%, the third consecutive monthly decline.

Fed officials have indicated that they see little reason to raise interest rates as long as inflation doesn't present a threat to the economy. Inflation is a threat to the value of government bonds because it erodes the future purchasing power of their fixed interest and principal payments.

"We think the bond market is sending a pretty accurate signal about expectations for slow inflation and growth," said Bob Browne, chief investment officer for Northern Trust. In setting rates this year, "the Fed needs to think about what the economy will look like in 2020," he said.

Fed funds futures, which investors use to speculate on the direction of central-bank policy, showed that investors see a 25% probability that officials will cut interest rates this year, compared with a 75% chance that they stay steady, according to CME Group data. A month ago, the odds of a cut were 8% compared with 2% odds of an increase and 90% chances the Fed would stay on hold.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

(END) Dow Jones Newswires

March 19, 2019 16:17 ET (20:17 GMT)