TREASURIES-US yields touch one-month low as oil prices slide with Iran war deal

* 10-year Treasury yield reaches lowest point since May 12

* Bond rally loses steam as investors see more uncertainty in monetary policy

* Fed expected to keep interest rates steady on Wednesday after first meeting chaired by Kevin Warsh (Updated in New York afternoon time)

By Tatiana Bautzer

NEW YORK, June 15 (Reuters) - U.S. Treasury yields fell to a one-month low on Monday as oil prices slid with the announcement of a preliminary agreement to end the Iran war.

The rally lost steam during the day, as investors considered the end of the war is unlikely to change the widely held market expectations of a Federal Open Market Committee meeting decision to keep rates steady on Wednesday.

The yield on 10-year Treasury notes fell to 4.4197%, the lowest since May 12, and was last down 1.4 basis points at 4.471%. Yields move inversely to prices.

U.S. President Donald Trump said the Strait of Hormuz, through which a fifth of global oil and gas typically flows, would reopen on Friday and that he has ordered the end of the U.S. blockade on Iranian ports.

WTI oil, the U.S. benchmark, was last down more than 5% to just above $80 a barrel, its lowest since early March. But it is still far above the pre-war prices around $65.

The U.S.-Iran deal is expected to ease pressure on the Fed, which will hold its first meeting chaired by Trump appointee Kevin Warsh on Wednesday, to raise rates to curb inflation.

"However, the oil shock is not over, and we are not at the point of reviving hopes of interest rate cuts this year. We would need more concrete changes in the macro outlook," said BMO's U.S. rates strategist Vail Hartman.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, fell 2.3 basis points to 4.062%.

Most analysts expect the Fed to leave the fed funds target unchanged at 3.50% to 3.75% and remove the easing bias from the official statement. "There is a lot of uncertainty about how the new Fed chair will behave, and seems the outlook will become less clear," said Lou Brien, market strategist at DRW Trading.

Unlike his closer predecessors, Warsh does not want to give forward guidance to investors about the future monetary policy, and markets will be attentive to how he will balance the political pressure in his relationship with Trump with the need to act against inflation.

The 10-year TIPS breakeven rate, which subtracts the TIPS yield from the nominal Treasury yield and is viewed as a proxy for inflation expectations, was last at 2.311%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

BMO analysts said markets are currently speculating on higher neutral policy rates, contributing to a rise in long-run real, inflation-adjusted rates over the past few months. (Reporting by Tatiana Bautzer; Editing by Nia Williams, Colin Barr and Will Dunham)