NEW YORK, Nov 27 (Reuters) - U.S. Treasury yields were lower on Monday, with the benchmark U.S. 10-year Treasury yield extending declines after a larger-than-expected drop in monthly home sales data.

New home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month, the Commerce Department said, below the 723,000 units estimate of economists polled by Reuters. September's sales pace was revised lower to 719,000 units from the previously reported 759,000 units.

"It's the economic data and central bank policy and whatever information comes out within those two areas, those are going to be the areas that are going to move Treasury yields up or down at this point," said Jim Barnes, director of fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania. "You're going to see yield somewhat range bound, but those to me would be the two factors and today (Monday) it's the weak economic data that has investors attention."

The yield on the benchmark U.S. 10-year Treasury note fell 9 basis points to 4.392%.

Despite a climb last week, the 10-year yield is on track for its biggest monthly decline since March, as investors largely believe the Federal Reserve is done with its interest rate hike cycle and attempts to price in when the central bank will instead cut rates.

Softening economic data, including a reading on inflation two weeks ago, has fueled expectations the Fed will hold rates at their current level, while pricing in a slightly greater than 50% chance of a rate cut of at least 25 basis points in May, according to CME's FedWatch Tool.

Investors will get another look at inflation data this week in the form of the personal consumption expenditures (PCE) price index.

The yield on the 30-year bond fell 8 basis points to 4.535%.

European Central Bank (ECB) President Christine Lagarde said that euro zone inflation pressures are easing but wage growth is still strong, so the ECB's fight to contain price growth is not yet done.

Federal Reserve Chair Jerome Powell is scheduled to speak on Friday.

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 50.07 basis points, down 1.95 basis points from Friday. An inverted yield curve is seen as a reliable signpost of an upcoming recession.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 6 basis points to 4.897%

A $54 billion auction of two-year notes was seen as pedestrian, with weaker-than-average demand of 2.54 times the notes on sale. A $55 billion auction of five-year notes was viewed as passable with a high yield of 4.420%, lower than the market at the bidding deadline, but demand of 2.46 times the notes on sale was on the light side and the lowest of the year.

More supply will come to the market this week as Treasury auctions $39 billion in seven-year notes on Tuesday.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.160% after closing at 2.290% on Friday, its highest close in nearly two weeks.

The 10-year TIPS breakeven rate was last at 2.22%, indicating the market sees inflation averaging about 2.2% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Will Dunham and Marguerita Choy)