(Updates to New York afternoon)

By Alden Bentley and Karen Brettell

NEW YORK, Feb 18 (Reuters) - U.S. Treasury yields rose

on Tuesday as investors returned from the Presidents Day holiday

weekend, digesting last week's market swings and another piece

of data showing growth remains strong enough to complicate the

Federal Reserve's easing path.

The benchmark 10-year Treasury note yield briefly dipped,

then rose after the New York Fed's February Empire State

business conditions index came in at a stronger-than-expected

5.7, versus -12.6 in January.

Lou Brien, market strategist at DRW Trading in Chicago, said

the report supported the idea that the economy was in even

better shape than when the Fed met in January and left the

policy rate at 4.25%-4.50%, after bringing it down a percentage

point since September.

"On a holiday week like this when volumes might be a little

light, sometimes lesser data can move the market a little bit

more than usual," Brien said.

Other data on Tuesday showed U.S. homebuilder sentiment

tumbled to a five-month low in February on worries that tariffs

on imports would combine with higher mortgage rates to further

drive up housing costs.

Brien added that Wednesday's release of the Federal Open

Market Committee meeting minutes for January could give the

market an interesting juxtaposition between how the economy

looked then and subsequently.

But the events calendar is light. The Treasury International

Capital System (TICS) report on foreign Treasury holdings on

Tuesday showed Japan and China both cut their holdings in

December. The Treasury Department will auction $16 billion in

20-year bonds on Wednesday and $9 billion in 30-year Treasury

Inflation-Protected Securities on Thursday. S&P Global releases

manufacturing and services PMIs on Friday.

The fed funds futures term structure shows traders

expect the Fed to stand pat until at least July before it eases

another 25 basis points, with another cut not coming until

perhaps January, according to LSEG calculations.

The benchmark U.S. 10-year Treasury note yield

was up 6.7 basis points on the day at 4.543%.

The two-year U.S. Treasury yield, which

typically moves in step with interest rate expectations,

was 3.6 basis points higher at 4.295%.

The 30-year bond yield rose 6.7 basis points

to 4.7627%.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between two- and 10-year Treasury notes

, seen as an indicator of economic expectations,

was at a positive 24.5 bps, steeper than 21.3 bps late Friday.

Investors are also watching progress in U.S.-Russia peace

talks on ending the war in Ukraine after an initial meeting that

excluded Kyiv.

BUMPY PROGRESS

San Francisco Fed President Mary Daly said on Tuesday that

while there was no reason to be discouraged about the bumpy and

sometimes imperceptible progress toward the U.S. central bank's

2% inflation target, the Fed should keep short-term borrowing

costs where they are until progress is more visible.

Fed Governor Christopher Waller also said on Monday he

agrees policy should remain on hold until inflation falls again.

That may only be a matter of time, he said, noting that a recent

"disappointing" rise in the Consumer Price Index may reflect

seasonal issues, not rising price pressures.

He said his "baseline" view is that the Trump

administration's new tariffs will have only a modest impact on

prices that the Fed should try to look through in setting

monetary policy.

Treasuries seesawed last week, with the 10-year yield rising

on Wednesday to 4.66%, its highest in nearly three weeks, off a

hot January Consumer Price Index report. It then tumbled through

Friday as PPI and retail sales data indicated inflation was less

worrisome and the consumer was less active than expected.

The breakeven rate on five-year U.S. Treasury

Inflation-Protected Securities (TIPS) was last at

2.672% after closing at 2.651% on February 14.

The 10-year TIPS breakeven rate was last at

2.457%, indicating the market sees inflation averaging under

2.5% a year for the next decade.