NEW YORK, Jan 22 (Reuters) - Treasury yields fell on Monday as investors took advantage of a recent decline in bond prices to buy ahead of economic reports this week that could influence the Federal Reserve and its assessment of U.S. interest rates.

Treasuries began the day tracking European bonds, said Tom di Galoma, managing director and co-head of global rates trading at BTIG.

"That's just pulling us down a bit," he said. "We started to see lower yields in U.S. Treasuries and I think it's really just a function of European rates falling."

After the 2023 year-end bond rally, Treasury yields, which move inversely to their price, rose sharply last week as central bank officials pushed back against market expectations that the Fed would soon cut rates as inflation cools.

Fed funds futures show the likelihood of a Fed rate cut in March has slipped to 41.5% from 81% on Jan. 12, according to CME Group's FedWatch Tool. The odds the Fed's target rate stays in a range of 5.25%-5.50% has increased to 15% from zero.

A string of economic indicators last week showed resilience despite high interest rates, suggesting the Fed may not shift to a less restrictive posture as soon as previously expected.

Monday's lower yields are the result of "a retracement of what we saw last week, when we got a bit of a pushback against the market rally that we saw late last year," said Jonathan Mondillo, head of North American fixed income at abrdn.

"Portfolio managers have cash to put to work, and a nice parking position is Treasury bonds."

Benchmark 10-year Treasury yields were down 4.8 basis points (bps) at 4.097%, but still up more than 20 bps from their close of 3.86% on the last trading day of 2023.

Two-year yields, which typically reflect market expectations for interest rate changes, fell 2.5 bps to 4.383%.

The larger drop in 10-year yields deepened the inversion of the two- and 10-year yield curve to -28.8 bps. The curve has been inverted, with short-term bonds yielding more than longer ones, since July 2022. The phenomenon has reliably preceded recessions.

Investors await gross domestic product data for the fourth quarter on Thursday, and the Personal Consumption Expenditures index (PCE) on inflation on Friday.

The Treasury will sell $60 billion in two-year notes on Tuesday, $61 billion of five-year notes on Wednesday and $41 billion on seven-year notes on Thursday.

(Reporting by Davide Barbuscia and Herbert Lash; Editing by Kirsten Donovan and Richard Chang)