*

GDP revised up to 3.0%, consumer spending also higher

*

Weekly jobless claims slightly below estimates

*

Market expectations for 50 bp September cut dip

(Updated at 2:26 p.m. ET/1826 GMT)

By Chuck Mikolajczak

NEW YORK, Aug 29 (Reuters) - U.S. Treasury yields rose

on Thursday, after data indicated the economy was on solid

enough footing to give the Federal Reserve room to be less

aggressive in cutting interest rates this year.

The Commerce Department said gross domestic product

increased at a 3.0% annualized rate last quarter, revised up

from the 2.8% rate reported last month, while consumer spending,

which accounts for more than two-thirds of the economy,

increased at an upwardly revised 2.9% rate versus the previously

reported 2.3% pace.

A separate report showed weekly initial jobless claims

slipped to 231,000 last week, slightly below the 232,000

estimate of economists polled by Reuters and consistent with

levels that indicate a steadily cooling labor market.

"The market marginally decreased the pricing for 2024 rate

cuts on the better-than-expected revisions to GDP, which were

largely led by a stronger consumer and the consumer strength is

really what markets are focused on, rather than inflation," said

Gennadiy Goldberg, head of U.S. rates strategy at TD Securities

in New York.

"Going forward, markets are going to be much more focused on

employment and the state of the consumer for direction to gauge

the magnitude of possible rate cuts."

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

rose 2 basis points to 3.862%, its fourth straight

daily climb, and on track for its biggest one-day gain in a

week.

Markets are fully pricing in a rate cut of at least 25 basis

points (bps) at the Fed's September meeting, although

expectations for a cut of 50 bps fell to 34.5% after the data,

down from 38% in the prior session, according to CME's FedWatch

Tool.

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 1.4 bps, its highest since August 8.

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

typically moves in step with interest rate expectations,

climbed 2.9 basis points to 3.896%.

The yield on the 30-year bond advanced 1.5

basis points to 4.146%.

On Wednesday, Federal Reserve Bank of Atlanta President

Raphael Bostic said that with inflation down farther and the

unemployment rate up more than he anticipated, it may be "time

to move" on rate cuts, but he wants to be sure before pulling

that trigger. Bostic is also expected to speak later on

Thursday.

Yields briefly moved higher after a soft auction of $44

billion in seven-year notes, the final auction of the

week, with a below average demand of 2.5 times the notes on

sale. The yield was last up 2.6 basis points to 3.763%.

Data on Friday in the form of the July personal

consumption expenditures (PCE) will indicate whether inflation

continues to cool.

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

Inflation-Protected Securities (TIPS) was last at

2.056% after closing at 2.046% on August 28.

The 10-year TIPS breakeven rate was last at

2.159%, indicating the market sees inflation averaging about

2.2% a year for the next decade.