(Updated at 10:27 a.m. ET/ 1427 GMT)

By Chuck Mikolajczak

NEW YORK, July 25 (Reuters) - U.S. Treasury yields were

mostly lower on Thursday after a tumble in equities helped fuel

a safe-haven bid for bonds, as a solid reading on economic

growth failed to alter expectations for a rate cut from the

Federal Reserve.

Yields briefly pared declines after the Commerce

Department's advance report on second-quarter gross domestic

product

grew at

a 2.8% annualized rate, above the 2.0% rise forecast by

economists polled by Reuters and stronger than the 1.4% rate in

the first quarter. In addition, the data showed inflation

pressures eased, giving the Fed room to cut rates this year as

the market widely expects.

Other data showed weekly initial jobless

claims fell

more than expected to 235,000 compared with the 238,000

forecast, indicating a cooling but still solid labor market.

The U.S. stock market sold off sharply on Wednesday, as

drops in Google parent Alphabet and Tesla,

two megacap names that have helped lift the stock market to

record highs, sparked a broader selloff in the wake of their

earnings reports.

"The bond market is being pretty resilient because that

was a hot GDP print," said Jay Hatfield, CEO at Infrastructure

Capital Advisors in New York.

"We're setting up for a Goldilocks-type situation where

we feared that the housing sector is really rolling over and

that might cause GDP to go to at least zero, but that doesn't

seem like it's going to happen and then the Fed will finally

cut, late, but still cut."

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

fell 6.5 basis points, on pace for its biggest daily

drop in two weeks, to 4.221%.

The yield on the 30-year bond fell 7.5 basis

points to 4.474%.

The Fed is scheduled to hold its next policy meeting at the

end of July. Markets see only a slight chance for a rate cut of

at least 25 basis points (bps) at that meeting, but are fully

pricing in a September cut, 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 18.1 basis points after

steepening to a negative 13.0, its least inverted since Oct. 23.

An inversion of this part of the curve is widely viewed as a

reliable signal that a recession is likely to follow in one to

two years, although some analysts have noted the move out of

inversion may be a better indicator of an oncoming recession.

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

moves in step with interest rate expectations,

fell 1.8 basis points to 4.398%.

After auctions of $69 billion in two-year notes and $70

billion in five-year notes earlier this week, another

$44 billion in seven-year notes is scheduled for

Thursday in the week's final auction.

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

Inflation-Protected Securities (TIPS) was last at

2.147% after closing at 2.169% on July 24.

The 10-year TIPS breakeven rate was last at

2.249%, indicating the market sees inflation averaging about

2.2% a year for the next decade.