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 Asian stocks were mostly higher on Tuesday as investors cheered the prospect that the world's largest economy will avert a major debt default, improving sentiment across most asset classes.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4% early Tuesday, after U.S. stocks were closed on Monday for the Memorial Day holiday. The index is down 1.3% so far this month.

Australian shares were up 0.03% while the Nikkei stock index slipped 0.28%, cooling a bit after the Japanese benchmark hit a 33-year high on optimism over the U.S debt deal and a weaker yen, which helps the country's exporters.

Hong Kong's Hang Seng Index climbed 0.31% while China's CSI300 Index dipped 0.06%.

In Asian trade, longer-dated U.S. Treasuries rallied on Tuesday as bond traders welcomed the deal to suspend Washington's borrowing limit.

Despite the cheer, investors say markets are not out of the woods year.

"The U.S had a poor resolution to the debt ceiling negotiations with still a huge increase in government debt and no real cuts to spending but has relieved pressure for now," said James Rosenberg, an advisor at broker Ord Minnett in Sydney.

"There's still a huge disconnect between bond markets and equities. The bond market is implying there is an extreme 70% probability on a U.S. recession in the next year. These signals stand in stark contrast to the resilient equity market."

The deal suspends the debt ceiling until January 2025 in exchange for caps on spending and cuts in government programmes.

Narrow margins in the House of Representatives and Senate mean moderates from both sides will have to support the bill for it to pass.

Benchmark 10-year yields dropped 6 basis points at the open of trade in Tokyo to 3.7596%. Thirty-year yields fell 5.5 bps to 3.9207%.

While U.S cash markets were closed on Monday, S&P 500 e-minis were up 0.32%, reflecting the positive reaction to the debt deal.

With the debt deal heading to Congress for approval, JB Were analysts said there could be up to $600 billion worth of bill issuance in the next six to eight weeks.

"As liquidity gets drained from the banking system with bill issuance, what impact could that have on broader markets? Some estimates suggest it could be the equivalent of one 25 basis points rate hike as far as financial conditions are concerned," the investment firm's analysts wrote in a note on Tuesday.

The dollar rose 0.02% on Tuesday against the yen to 140.47 , just below the year's high of 140.91 hit on Monday.

The euro was up 0.1% on the day at $1.0714, having lost 2.78% in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, slipped to 104.23, just off a more than two-month high. It was also trading near a six-month peak against the Chinese yuan.

U.S. crude ticked up 0.3% to $72.89 a barrel. Brent crude fell to $77.05 per barrel.

Gold was slightly lower with the spot price at $1,942.39 per ounce.