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Bond prices extend gains, Fed eyed

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U.S. bond prices extended gains as investors focus on the Federal Reserve's upcoming two-day meeting.

The Fed's Federal Open Market Committee is scheduled to meet on Tuesday and Wednesday and investors will pay attention as to whether or not it will drop the word "patient" from its formal statement.

Yields on benchmark 10-year notes—used to calculate mortgage rates and other consumer loans—edged down to 2.0947 percent, having closed at 2.110 percent.

The Fed is expected to signal that interest rates hikes are on their way in its policy statement on Wednesday, by dropping its regular phrase that states that the central bank can be "patient" before beginning to normalize monetary policy.

"The recent strength of the U.S. labor market is increasing pressure on the Fed to begin raising rates gradually from around the middle of this year, most likely in either June or September, when the Fed is reasonably comfortable as well that inflation will return back to 2 percent in the medium-term," said Lee Hardman of Bank of Tokyo-Mitsubishi in a research note on Monday.

"Fed Chair (Janet) Yellen has clearly highlighted that removing "patient" will not necessarily signal that a rate hike will come as soon as June, although the risk of a rate hike in the near-term will increase," he added.

Read MoreTreasury prices and yields: CNBC explains

U.S. Treasury prices also rose after factory production slipped 0.2 percent last month after a revised 0.3 percent decline in January, the Federal Reserve said on Monday. Auto production fell 3.0 percent last month.

Read MoreTrack US bonds

Two-year note yields hit a one-week low of 0.6370 percent earlier on Monday. They were last at 0.6491 percent.

Seven-year Treasury note yields also declined to 1.8981 percent.

In Europe, the 10-year German bund edged up to 0.2450 percent.

—Reuters contributed to this report.