(Updates yields, adds investor comment, graphic)

By Davide Barbuscia

NEW YORK, June 24 (Reuters) - U.S. Treasury yields were

largely unchanged on Monday as investors awaited economic and

inflation data later this week to assess whether a recent

weakening in economic activity will continue, which would

strengthen the case for a first interest rate cut by the Federal

Reserve in the coming months.

Yields, which move inversely to prices, have declined this

month as price pressures have eased and data across different

sectors of the economy, including the labor market, started to

show moderation.

Benchmark 10-year yields are down by over 25

basis points so far this month and were at about 4.251% on

Monday, just slightly lower than Friday. Two-year yields

, which tend to more closely reflect monetary policy

expectations, were last at 4.738%, marginally higher than their

close last week.

Barring a rebound in inflation or a sharper-than-anticipated

slowdown in the economy - both seen as unlikely scenarios at

this stage - many in the market expect yields to move sideways

until there is more clarity over the extent of any rate cuts.

"Markets are thinking the Fed is going to cut at some

point ... but it is going to take a lot of damage to the economy

to get rates to move much lower," said John Luke Tyner, head of

fixed income and portfolio manager at Aptus Capital Advisors.

Investors will be looking at first quarter gross domestic

product estimates released on Thursday and, more importantly,

May inflation data on Friday, to get more clues about the U.S.

central bank's next steps as it tries to battle inflation

without causing a recession.

"I think there will be some wait and see in the market. PCE

(personal consumption expenditures) inflation on Friday will be

the biggest data release of the week," said Mona Mahajan, senior

investment strategist at Edward Jones. "Otherwise a relatively

quieter week and looks like that's been reflected in markets."

Federal Reserve Bank of Chicago President Austan Goolsbee

said in a CNBC interview on Monday he was still looking for

inflation to cool further as part of the process that would open

the door to a rate cut.

Cleveland Fed President Loretta Mester, who is set to retire

at the end of the month, told Reuters she expects inflation will

cool over time and eventually allow the Fed to cut rates. She

said she'd like to see "a few more months of data" before

gaining confidence that easier policy is warranted.

Traders in futures tied to the Fed's policy rate were

assigning a 61.2% chance to a first 25 basis point rate cut in

September, LSEG data showed on Monday, with a total of nearly

two rate cuts priced for this year.

Meanwhile, the gap between two- and ten-year yields remained

deeply negative at about minus 48.6 basis points. An inversion

in that part of the yield curve, which occurs when shorter-dated

Treasuries yield more than longer-dated ones, has historically

indicated that a recession is on the horizon.