By Scott Murdoch

HONG KONG, June 14 (Reuters) - Asian shares tumbled on Tuesday after Wall Street officially entered bear market territory and bond yields hit a two-decade high on fears aggressive U.S. interest rate hikes would push the world's largest economy into recession.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.9% early in Asia.

Australian shares S&P/ASX200 sank 5% in early trade, while Japan's Nikkei stock index was down 1.74%.

The negative tone in Asia follows a bleak session in the U.S on Monday, which saw Goldman Sachs forecast a 75 basis point interest rate hike at the Federal Reserve's next policy meeting on Wednesday.

"The U.S. will see rate rises faster and higher than Wall Street has been expecting," James Rosenberg, Ord Minnett advisor in Sydney told Reuters. "There will likely be the double impact of earnings forecasts being trimmed and further price to earnings derating."

Expectations for aggressive U.S rate hikes rose after inflation in the year to May shot up by a sharper than predicted 8.6%.

Fears of higher rates leading to a U.S. recession kicked the S&P 500 down 3.88%, while the Nasdaq Composite lost 4.68%. The Dow Jones Industrial Average fell 2.8%.

The benchmark S&P 500 is now down more than 20% from its most recent record closing high, confirming a bear market, according to a commonly used definition.

In U.S. trading, benchmark 10-year Treasury yields hit their highest since 2011 on Monday, and a key part of the yield curve inverted for the first time since April as investors braced for the prospect that attempts to stem soaring inflation would dent the economy.

Early in Asia, the yield on benchmark 10-year Treasury notes rose to 3.3828% compared with its U.S. close of 3.371% on Monday.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 3.4002% compared with a U.S. close of 3.281%.

"Higher inflation, slower growth and higher interest rates are a damaging combination for financial assets," ANZ strategists wrote on Tuesday.

The dollar dropped 0.06% against the yen to 134.32 but remains close to its more-than-two-decade high of 135.17 reached on Monday.

The European single currency was flat at $1.0407, having lost 3.04% in a month, while the dollar index, which tracks the greenback against a basket of major currencies, was up at 105.19.

U.S. crude dipped 0.06% to $122.14 a barrel. Brent crude was down 0.13% 122.14 per barrel.

Gold was slightly lower. Spot gold was traded at $1818.7395 per ounce.

(Reporting by Scott Murdoch in Hong Kong; Editing by Sam Holmes)