By Karen Brettell

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 US2YT=RR 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 US10YT=RR 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 US2US10=TWEB steepened to 52.4 basis points.

The 30-year bond US30YT=RR 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.

(Reporting By Karen Brettell, Editing by Nick Zieminski)

((karen.brettell@thomsonreuters.com;))