TREASURIES-Prices steady ahead of Fed policy meeting

* Investors uncertain over Fed's exit strategy

* Fed fund futures imply little chance of Q3 rate hike

* U.S. factory data hints at slower growth (Adds analyst's quote, updates prices, changes byline)

By Chris Reese

NEW YORK, March 15 (Reuters) - U.S. Treasuries prices were little changed on Monday as investors moved to the sidelines before a Federal Reserve policy meeting, uncertain over what the central bank may signal about its exit strategy.

Investors widely expect the U.S. central bank to stick to the near-zero-percent interest rate policy adopted in December 2008 to support the economic recovery. But they are less sure of the Fed's tools and timetable for withdrawing the hundreds of billions of dollars pumped into the financial system in an effort to combat the recession and the global credit crisis.

The Fed will hold its one-day policy meeting on Tuesday, and investors were reluctant to take a strong market position ahead of the gathering.

"Traders didn't seem willing to place any large bets during the session, and who could blame them," said Carley Garner, senior analyst at DeCarley Trading in Las Vegas.

Benchmark 10-year Treasury notes US10YT=RR traded unchanged in price with a yield of 3.71 percent, while two-year notes US2YT=RR were also steady with a yield of 0.96 percent.

"People are on the sidelines and are waiting for what the Fed has to say in its statement," said Marty Mitchell, head of government bond trading at Stifel Nicolaus in Baltimore.

U.S. federal funds futures implied traders expect little chance the Fed will raise rates until the third quarter.

Economic data on Monday signaled some slowing in the U.S. manufacturing sector, which had been a bright spot in an otherwise unremarkable recovery.

The New York Federal Reserve said its index of factory activity in New York state fell to 22.86 in March from 24.91 in February. The decline, however, was less than expected. See [ID:nN15134202].

U.S. industrial output edged up 0.1 percent in February, in line with estimates, compared with a 0.9 percent increase in January, the Federal Reserve Board reported. [ID:nNYS007841]

Until the U.S. economy exhibits consistent strength, the Fed will have little choice but to leave benchmark rates at rock-bottom levels, analysts said.

Still some analysts anticipate that policy makers could signal on Tuesday after the Fed meeting a readiness to remove the billions in cash the Fed pumped into the financial system.

The Fed's extraordinary policy measures and the Treasury Department's massive borrowing have fanned concerns over the United States' credit-worthiness and investor appetite for Treasuries.

Rating agency Moody's Investors Service said the United State's AAA rating is safe for now, but risks to the coveted rating, which allows the United States to borrow at the lowest rates in the financial markets, have risen due to a burgeoning debt load. [ID:nLDE62E0FX]

Treasury data published on Monday showed foreign investors bought $61.4 billion in Treasuries in January, down from $69.9 billion in December. Official investors, mainly foreign central banks, sold a net $4.2 billion in U.S. government securities. [ID:nN15160281] (Additional reporting by Richard Leong; Editing by James Dalgleish)