GLOBAL MARKETS-Investors cautious ahead of vote on Trump's 'big beautiful' tax bill

By Marc Jones

LONDON, May 22 (Reuters) - The bond vigilantes were stalking global debt markets on Thursday, keeping the dollar and stocks subdued too, ahead of a crucial vote in the United States on President Donald Trump's "big beautiful" tax bill.

Caution dominated in Europe after a lacklustre U.S. 20-year bond sale on Wednesday reinforced a "Sell America" narrative already nagging on investors' minds after Moody's last week cut its triple-A credit rating for the United States.

Germany's long-term bond yields hit their highest in two-months as global yield curves steepened.

Britain's government borrowed more than expected in April, figures showed, while euro zone business activity unexpectedly slipped back into contraction territory.

The non-partisan Committee for a Responsible Federal Budget estimates that the U.S. bill, which will extend Trump's signature 2017 tax cuts as well boost military and other spending, will increase the U.S. debt pile by $3.8 trillion over the next decade.

UBS economist Paul Donovan said while the final details were still to be seen, "the broad impact is to push the U.S. further along a rising debt path. Bond investors are less than happy".

The yields on 30-year Treasury bonds - a proxy for super long-term U.S. government borrowing costs - US30YT=RR reached 5.108%, its highest since October 2023 and the 20-year yield hit 5.126%, its highest since November that year.

The bond market in Japan has also been in focus given it has the highest debt-to-GDP ratio of any major economy. The 30-year JGB yield JP30YTN=JBTC hovered at 3.155%, not far from the record high of 3.185% hit in the previous session. JP/

Stocks in Asia also fell after Wall Street tumbled following the tepid debt auction. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended 0.6% lower, while Japan's Nikkei .N225 fell 0.8% on a stronger yen. FRX/

TRADE DEAL PROGRESS

Oil prices fell more than 1% following a report that OPEC+ is discussing a production increase for July, stoking concerns that any potential jump in global supply will exceed demand growth. O/R

Brent futures LCOc1 fell $1.05, or 1.62%, to $63.86 a barrel in Europe, while U.S. West Texas Intermediate crude CLc1 dropped 97 cents, or 1.58%, to $60.60.

Modest progress to date on trade deals has also kept investors jittery.

Attention will also be on a Group of Seven meeting in Canada, where finance ministers put a positive spin on discussions to try to reach an agreement on a joint communique largely covering non-tariff issues.

Investors have also been scouring for any hints that currency markets could be part of trade negotiations. However, Thai and Japanese officials said currency markets were not part of their discussions.