TREASURIES-Bond prices rally on month-end buying, hold gains after Yellen

(Recasts with Yellen speech, late month buying; updates prices)

* Yields fall on month-end demand

* Yellen comments seen as mildly hawkish on interest rate

hike

* Disappointment after GDP wasn't revised higher

By Karen Brettell

NEW YORK, March 27 (Reuters) - U.S. Treasury yields fell and

held near session lows on Friday after Federal Reserve Chair

Janet Yellen gave mildly hawkish comments on a potential

interest rate increase this year and as investors bought bonds

ahead of month-end rebalancing.

Investors covering short positions and month-end demand sent

yields lower, retracing some weakness from Thursday when the

Treasury saw tepid demand for an auction of seven-year notes.

"Month-end is on Tuesday and there's a fairly large index

extension," said Daniel Mulholland, head of Treasuries trading

at Credit Agricole in New York.

U.S. benchmark 10-year Treasury notes were last

up 9/32 in price to yield 1.96 percent, down from 2.00 percent

late on Thursday.

Yields rose slightly - but briefly - after the Fed's Yellen

said late on Friday that it would not be "prudent" for the U.S.

central bank to postpone an interest rate hike until it reached

its inflation target of 2 percent.

"That's the key, mildly hawkish statement in these

comments," said Mulholland.

Bonds had gained earlier on Friday after data showed that

U.S. economic growth cooled in the fourth quarter as previously

estimated, disappointing traders who had expected an upward

revision.

Gross domestic product expanded at a 2.2 percent annual

rate, unrevised from last month's forecast, the U.S. Commerce

Department said on Friday. The economy grew at a 5 percent rate

in the third quarter.

Robust consumer spending, however, limited the slowdown in

the pace of activity.

"It was disappointing because the headline was expected to

be revised up and it wasn't. The most important component,

personal consumption, was revised higher, however, and that was

expected," said Lou Brien, a market strategist at DRW Trading in

Chicago.

The next major data release for the market will be next

week's employment report for March. Job gains for the past few

months have been strong but some economists say that job growth

is outpacing other economic measures, which may mean they have

to slow if economic activity does not accelerate.

(Editing by Chizu Nomiyama and G Crosse)