TREASURIES-Hawkish Fed shift sends yields to one-month high

* Fed's most divided policy vote since 1992, with three officials dissenting

* Kevin Warsh set to succeed Powell, but faces resistance to rate cuts

* Rising oil prices and strong capital goods data add to inflation concerns (Updated in New York afternoon time)

By Karen Brettell

NEW YORK, April 29 - U.S. Treasury yields rose to a one-month high on Wednesday after Federal Reserve officials held interest rates steady but signaled growing concern about inflation, while doubts over a near-term resolution to the war in Iran also sent oil prices higher.

Three policymakers dissented from the Fed's statement, reflecting a deepening split over whether the central bank should continue signaling a bias toward lower borrowing costs.

Chair Jerome Powell said at a press conference that the Fed could drop that easing bias as soon as its next meeting.

"The key takeaway is if Kevin Warsh had hoped to inherit a committee that was willing to cut rates in the near term, that's not what he's getting," said Zachary Griffiths, head of investment-grade and macro strategy at CreditSights.

Warsh, President Donald Trump's pick to lead the Fed, cleared a key procedural hurdle on Wednesday, opening the way for him to succeed Powell next month.

While Warsh is expected to push for more aggressive rate cuts than Powell would have, Wednesday's decision suggests he may struggle to bring fellow policymakers along. Powell added that he intends to remain on the Fed's board as a governor, complicating any effort by Trump to install a more dovish voice in his place.

Fed funds futures traders have now priced out nearly all odds of a rate cut this year and are pricing in roughly a 40% chance of a rate hike by April 2027, up from about 20% before the announcement.

Powell said he will leave the central bank when "I think it's appropriate to do so," tying his departure to his concern that a series of legal challenges to the Fed could undermine its ability to conduct monetary policy independently.

The Justice Department announced on Friday it is closing its investigation into Powell over cost overruns in renovations of the Fed's Washington headquarters, with U.S. Attorney Jeanine Pirro saying she had referred the matter to the Fed's internal watchdog, the Office of Inspector General.

The 2-year note yield, which typically moves in step with Fed interest rate expectations, rose 8.4 basis points to 3.928%, the highest since March 27. The yield on benchmark U.S. 10-year notes rose 5.4 basis points to 4.408% and reached 4.432%, also the highest since March 27. The yield curve between two- and 10-year notes flattened by around 3 basis points to 47.5 basis points.

Yields had also moved higher earlier in the session, lifted by rising oil prices as stalled U.S.-Iran negotiations deepened fears of prolonged supply disruptions in the Middle East.

Trump discussed with U.S. oil executives how to manage the potential fallout from a months-long blockade of Iran's ports, while urging Tehran to "get smart soon" and sign a deal.

Breakeven rates on 10-year Treasury Inflation-Protected Securities - a market measure of future inflation expectations - climbed to a multi-year high of 2.489%, with Griffiths saying that the move reflects mounting concern that higher oil prices could reignite inflation.

"In a situation where the strait is closed for an elevated period, if anything there's probably upside risk to where oil prices are even today," Griffiths said.

"That flows through certainly the headline inflation and to a lesser extent through the core, which ties the Fed's hands if they were hoping to respond to what we think is a weak labor market and the prospect of greater productivity gains arguing for a lower policy rate," he added.

Separately, data released on Wednesday showed new orders for key U.S.-manufactured capital goods rose by the most in nearly six years in March, while shipments climbed solidly, pointing to robust business investment in equipment as a driver of first-quarter economic growth.

(Reporting by Karen Brettell; Editing by Sharon Singleton and Nick Zieminski)