(Updated at 2:28 p.m. ET/1828 GMT)

By Chuck Mikolajczak

NEW YORK, Aug 28 (Reuters) - U.S. Treasury yields were

barely higher on Wednesday after an auction was well received by

the market and investors turned toward data on economic growth

and inflation later in the week to gauge the path of interest

rate decisions by the Federal Reserve.

Investors have completely priced in a rate cut from the Fed

of at least 25 basis points at its mid-September policy meeting,

with expectations for a 50-bps cut at 36.5%, up from 11.3% a

month ago, according to CME's FedWatch Tool.

Yields have been declining as economic data has signaled a

softening economy and inflation has resumed cooling, leading Fed

Chair Jerome Powell to signal last week a shift in the central

bank's focus to supporting the labor market over combating

inflation.

"A lot of people are just kind of waiting for the September

meeting," said Tom di Galoma, managing director and head of

fixed income at Curvature Securities in Park City, Utah.

"The Fed is certainly ready to cut rates, I'm looking for 50

basis points in September. I'm probably an outlier, but the Fed

probably wants to make the first move a substantial one, they

want to probably get the economy going a little bit."

Yields saw little reaction, only moving slightly higher, to

an auction of five-year notes that was solid, with

demand for the notes at 2.41 times the notes on sale. The yield

was last up 0.7 bp to 3.664%.

The five-year auction follows a strong two-year note auction

of $69 billion on Tuesday, with more supply coming on Thursday

in the form of $44 billion in seven-year notes.

Data due on Thursday includes the second reading of economic

growth in the preliminary report on second quarter gross

domestic product. On Friday, the July personal consumption

expenditures data will indicate whether inflation continues to

cool.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at a negative 2.9 basis points after narrowing

to a negative 2.6 bps, its highest level since Aug. 8.

The narrower inversion suggested that the bond market is

pricing in the Fed's easing cycle.

The yield on the benchmark U.S. 10-year Treasury note

rose 1.1 basis points to 3.844%. The yield on the

30-year bond edged up 0.4 basis point to 4.132%.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations,

rose 0.6 basis point to 3.871%.

The break-even rate on five-year U.S. Treasury

Inflation-Protected Securities was last at 2.041%

after closing at 2.042% on Aug. 27.

The breakeven rate on five-year U.S. Treasury

Inflation-Protected Securities (TIPS) was last at

2.042%, unchanged from the close on Aug. 27.

The 10-year TIPS breakeven rate was last at

2.153%, indicating the market sees inflation averaging about

2.2% a year for the next decade.