(Recasts, adds comment, details updates prices)
* U.S. CPI rises 0.3 percent, Treasuries gain
* Geopolitics still a big factor
By Gertrude Chavez-Dreyfuss
NEW YORK, July 22 U.S. Treasury debt yields fell on Tuesday as benign U.S. inflation data suggested less pressure for the Federal Reserve to raise interest rates sooner than expected.
There was also some safe-haven buying in the afternoon, boosting bond prices, in connection with tensions in the Middle East after the Federal Aviation Administration advised U.S. airlines not to fly to Tel Aviv in Israel. The country is in the midst of an offensive in the Gaza Strip where more than 600 people have been killed.
But it was the U.S. consumer price index data that caught investors' attention in a market that has been riveted by fighting in the Middle East and Ukraine.
U.S. core CPI, a closely-watched inflation gauge, was below the Fed's 2-percent target, preventing yields, which move inversely with bond prices, from ratcheting higher.
"Core inflation numbers were below consensus and that has removed fears that the Fed will hike in a hurry," said Aaron Kohli, interest rate strategist at BNP Paribas in New York.
In late trading, benchmark 10-year U.S. Treasuries were up 1/32 in price to yield 2.469 percent, while the 30-year Treasury bond was up 6/32 in price, pushing the yield down to 3.254 percent. On Monday U.S. 30-year Treasury bond yields fell to their lowest since June 2013.
In the meantime, geopolitical concerns are still very much a factor in the U.S. Treasuries market.
Israel pounded targets across the Gaza Strip on Tuesday, saying no ceasefire was near, while European Union foreign ministers threatened Russia with harsher sanctions over Ukraine. But the tougher talk may not be matched by much action after France's president signaled the disputed delivery of a warship to Moscow would go ahead.
"Geopolitical concerns are one of the reasons investors are afraid of shorting Treasuries. They are certainly an aggravating factor," said BNP's Kohli.
Volume in the U.S. Treasury market was heavy in the morning with cash trading peaking at 149 percent of the 10-day moving-average, according to CRT Capital, before trending back down to just 108 percent.
U.S. five-year notes were the most active benchmark, taking a 32-percent market share, while 10s were a distant second at 26 percent. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler and Meredith Mazzilli)