(Updates yields, adds details on auction, investor comments,

graphic)

By Davide Barbuscia

NEW YORK, June 27 (Reuters) - U.S. Treasury yields

declined slightly on Thursday after economic data showed a

continued, though moderate, slowdown in economic activity.

The Commerce Department's Bureau of Economic Analysis

released estimates showing gross domestic product increased at a

revised 1.4% annualized rate last quarter, up from a previous

1.3% estimate. Real consumption growth was revised down to 1.5%

from 2%, indicating a slowdown in consumer spending due to a

combination of high interest rates and sticky price pressures.

"The 1.4% reading is solid, but indicates that economic

growth is slowing, although still comfortably above recession

levels," said Chris Zaccarelli, chief investment officer for

Independent Advisor Alliance, in a note. Growth was 3.4% in the

fourth quarter last year.

Data on Thursday also showed first-time applications for

U.S. unemployment benefits drifted lower last week, which could

assuage concerns over a material deterioration in the labor

market. At the same time, so-called continuing claims for

unemployment benefits increased 18,000 to a seasonally adjusted

1.839 million during the week ending June 15, the highest since

November 2021.

Benchmark 10-year yields, which move inversely

to prices, dropped after the data and were last at 4.288%, three

basis points lower than on Wednesday. Two-year yields

, which more closely indicate monetary policy

expectations, were also down about three points to 4.716%.

Yields edged lower also after a $44 billion seven-year

Treasury note auction, which saw solid investor demand. The

notes were sold at a high yield of 4.276%, slightly below the

expected rate at the time of the bid deadline, a sign that

investors were willing to pay up.

Still, Treasury yields remained overall in line with recent

levels, as investors weighed signs of the economy slowing

against a number of factors, including the rising U.S.

government debt burden, that could delay a much anticipated

shift by the Federal Reserve to a less restrictive stance.

"You can find weakness in a lot of economic data ... but

yields can't seem to break 4.2%," said Craig Brothers, senior

portfolio manager and head of fixed income at Bel Air Investment

Advisors, referring to 10-year bonds.

That was due to large amounts of debt supply, as well as the

slow decrease in inflationary pressures, he said. "As much as

the Fed wants everyone to feel great that we're making progress

towards their target of 2% (inflation), I don't think we're

going to get there very easily."

Kathryn Rooney Vera, chief market strategist at StoneX, said

unless price pressures drop sharply over the coming months, the

Fed is unlikely to lower rates until December.

"I don't think this combination of data says deceleration

and the Fed is going to start cutting," she said.

Investors on Thursday were pricing for nearly two 25 basis

point rate cuts this year, but they will be looking for more

clues on the path of interest rates with the release of personal

consumption expenditure inflation data on Friday.

Also on investors' radars will be a face-off between U.S.

President Joe Biden and Republican former president Donald Trump

in a TV debate later on Thursday.

"If Trump does well ... (and) it becomes clearer that one

party is going to be able to control the presidency and the

Congress, then I think Treasury yields will probably move

higher," said Brij Khurana, fixed income portfolio manager at

Wellington Management.