TREASURIES-US yields resume climb as fading Mideast optimism unsettles markets

By Rocky Swift

TOKYO, March 24 (Reuters) - U.S. Treasury yields resumed their upward climb in Asian trading on Tuesday, as optimism over a quick easing of the Middle East crisis faded, renewing concerns about inflation risks.

The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB rose 4.6 basis points to 4.382%, nearing the eight-month peak of 4.445% reached on Monday. The yield on the 30-year bond US30YT=TWEB rose 3.3 bp to 4.946%.

Yields closed lower overnight, after U.S. President Donald Trump said he had delayed a strike on Iranian energy infrastructure following what he described as productive talks.

But sentiment reversed after Tehran denied any negotiations with Washington and announced fresh attacks on U.S. targets, pushing with Asian shares off early highs and lifting crude prices.

"Markets are left striking a balance between welcoming the tentative news of possible de-escalation while weighing the immense uncertainty still clouding this progress," Ryan Wells, an economist at Westpac Group, said in a note.

While two tankers bound for India sailed through the Strait of Hormuz on Monday, the war continues to disrupt traffic through the crucial chokepoint, which typically handles about a fifth of global oil and liquefied natural gas shipments.

U.S. rate futures began to price in the possibility of an interest-rate hike later this year on Friday, after the Federal Reserve and other central banks held policy steady last week while cautioning about rising energy prices.

The two-year US2YT=TWEB U.S. yield, which typically moves in step with Fed rate expectations, rose 7.7 bps to 3.908%.

Investors trimmed bets on a December Fed rate hike to 13.6% from just above 25% in the prior session, per CME Group's FedWatch.

Fed Board Governor Michael Barr is due to speak in Phoenix, Arizona, later in the day about the economic outlook and community development.

On the data front, the Bureau of Labor Statistics will release the fourth-quarter labour productivity figures, while S&P Global will publish its March flash PMIs, with manufacturing expected at 51.3 and services at 51.5.