NEW YORK, June 28 (Reuters) - A series of upcoming

economic reports and Congressional testimony from Federal

Reserve Chairman Jerome Powell could jolt U.S. government bonds

out of a narrow trading range.

Yields on benchmark U.S. 10-year Treasuries, which move

inversely to bond prices, have bounced between about 4.20% and

4.35% since mid-June, as the market digested data showing

slowing inflation and signs of cooling economic growth in some

indicators. The 10-year yield stood at 4.33% on Friday.

So far, the economic numbers have failed to dispel

doubts over how deeply the Fed will be able to cut interest

rates this year, keeping Treasury yields range-bound. But next

week's U.S. employment data, followed by inflation numbers and

Powell's appearance could change that outlook.

"The market has settled into a narrative that we may see

incremental softness but not a growth scare," said Garrett

Melson, a portfolio strategist at Natixis Investment Managers

Solutions. "That will continue to keep us in this range, but the

one thing that will push it meaningfully lower is an increase in

the unemployment rate."

U.S. monthly inflation as measured by the personal

consumption expenditures (PCE) price index was unchanged in May,

a report released on Friday showed, advancing the narrative of

slowing inflation and resilient growth that has tamped down bond

market gyrations and buoyed stocks in recent weeks. Yet futures

linked to the fed funds rate showed traders pricing in just

under 50 basis points of rate cuts for the year.

Market reactions to employment data, due next Friday, could

be exacerbated by low liquidity during a week when many U.S.

bond traders will be on vacation for the July 4th U.S.

Independence Day holiday, said Hugh Nickola, head of fixed

income at GenTrust.

"The market is waiting for the other shoe to drop."

A recent survey by BofA Global Research showed fund managers

the most underweight bonds since November 2022. Some believe

that means yields could fall further if weakening data bolsters

the case for more rate cuts and spurs increased allocations to

fixed income.

Other highlights for the month include consumer price

data scheduled for July 11. Powell is scheduled to give his

semiannual testimony on monetary policy on July 9 at the Senate

Banking Committee, said the office of its chairman, Senator

Sherrod Brown, on Monday. If tradition holds, the Fed Chair will

deliver the same testimony at the House Financial Services

committee the following day.

Some investors are not convinced Treasury yields have much

further to fall. Despite its recent cooling, inflation has

proven more stubborn than expected this year, forcing the Fed to

rein in expectations for how aggressively it can cut rates. A

recent unexpected inflationary rebound in Australia underscored

how difficult it has been for some central banks to keep

consumer prices under control.

At the same time, some investors believe inflation is

unlikely to return to pre-pandemic levels and the U.S. economic

is likely to show a higher level of underlying strength,

limiting the longer term downside for bond yields, said Thierry

Wizman, global FX and rates strategist at Macquarie Group.

"The market has become much more acclimated to the idea that

when the Fed cuts rates, they won't cut by as much as people

surmised a few months ago," Wizman said. "People have adjusted

their expectations but there's a limit to how much yields can

fall on one month of bad data."