TREASURIES-US government bonds trade in tight range after rally

• Treasuries inch up in mid-morning trade after Monday's rally
• Investors to focus on Fed meeting, US tariff deadline next week
• Bonds range-bound amid lack of major economic data releases

By Davide Barbuscia

NEW YORK, July 22 (Reuters) - U.S. Treasury yields were slightly lower on Tuesday, with the market taking a breather after Monday's rally, which was driven by technical demand and renewed investor worries over the economic impact of U.S. tariffs.

Those concerns continued to loom over the bond market, particularly given the limited amount of economic data releases on Tuesday, and as Federal Reserve officials were in quiet mode ahead of the central bank's rate-setting meeting next week.

"There's not a lot of economic news coming out and we have the Fed meeting next week ... so it feels like we're in this very tight trading range where maybe some headline news may jolt the market a little bit," said Douglas Gimple, senior portfolio specialist at Diamond Hill.

"I think everyone's in wait and see (mode)," he said.

Fed Chair Jerome Powell spoke at a Fed banking conference on Tuesday but did not comment on the economic outlook and on monetary policy. In a CNBC interview ahead of the conference, Fed Vice Chair for Supervision Michelle Bowman said the central bank's ability to set monetary policy without political interference was "very important."

Those remarks follow a recent escalation of U.S. President Donald Trump's criticism of the Fed and Powell, for not lowering interest rates.

U.S. Treasury Secretary Scott Bessent, who on Monday called for a review of the central bank's operations outside of its core monetary policy mandate, said in an interview on Tuesday that there was no need for Powell to immediately step down.

The administration's criticism of the Fed could trigger some bond market volatility over the coming days, said Gimple at Diamond Hill, but he expected no major price changes until the end of the Federal Open Market Committee meeting on July 30.

While traders do not expect the Fed to cut rates next week, market participants will look for any indication on when the central bank will ease rates.

Next week will also be key for investors because of an August 1 deadline on U.S. tariffs that could see import duties rise significantly on a number of goods from U.S. trade partners in the absence of trade deals over the coming days.

"Both of these issues are intimately tied together, of course, insofar as the Fed would likely be more inclined to delay a rate cut, perhaps to December, if the FOMC felt that uncertainty about the tariff outlook were growing, all else equal," Thierry Wizman, global currency and rates strategist at Macquarie Group said in a note on Tuesday.

In mid-morning trade on Tuesday, yields across the curve were lower by about two basis points from Monday. Benchmark 10-year Treasury yields US10YT=RR stood at 4.346% and two-year yields US2YT=RR at 3.829%.

On the supply side, the Treasury Department will sell 20-year bonds worth $13 billion on Wednesday and 10-year Treasury Inflation-Protected Securities worth $21 billion on Thursday.