May 20 (Reuters) - U.S. Treasury yields rose on Tuesday

on concerns that a bill in Congress to cut taxes will worsen the

U.S. budget deficit at a faster pace than feared and with no

major U.S. economic data to drive market direction.

President Donald Trump is headed to Capitol Hill on Tuesday

to meet with congressional Republicans as they aim to reach

agreement on a sweeping tax-cut bill, with their narrow majority

divided over the scope of spending cuts.

Concerns over the bill helped to push yields higher on

Monday, with 30-year yields reaching an 18-month high.

It also comes after Moody's Investors Service on Friday cut

the U.S.' sovereign rating from the top "Aaa," citing a

worsening debt and fiscal outlook.

Investors and Federal Reserve officials are focused on how

tariffs will ultimately impact the economy as the Trump

administration also makes trade deals to reduce levies with some

countries.

But that could still take months before its impact is

clearly seen in the U.S. economic data.

"While we're waiting for everything from the tariffs to make

its way through data, the fiscal story is certainly getting a

lot more attention," said Jan Nevruzi, U.S. rates strategist at

TD Securities in New York.

U.S. yields were also pushed higher on Tuesday by Canadian

inflation data, Nevruzi said.

Canada's annual inflation rate eased to 1.7% in April, above

economists' expectations for a 1.6% gain. Two of the three core

measures of inflation, which are closely watched by the Bank of

the Canada, also hit 13-month highs on underlying price

pressures.

The 2-year note yield, which typically moves in

step with interest rate expectations, rose 0.4 basis points

to 3.987%.

The yield on benchmark U.S. 10-year notes

rose 3.4 basis points to 4.509%. It reached 4.564% on Monday,

the highest since April 11.

The yield curve between two-year and 10-year notes

steepened to 52.4 basis points.

The 30-year bond yield gained 4 basis points

to 4.981% after touching 5.037% on Monday, the highest since

November 2023.

Supply will also be in focus this week, with companies

expected to front load any debt sales before Monday's U.S.

Memorial Day holiday.

The Treasury Department will also sell $16 billion in

20-year bonds on Wednesday and $18 billion in 10-year Treasury

Inflation-Protected Securities on Thursday.