TREASURIES-U.S. bonds rise as weak growth stokes doubts on rate hikes

* U.S (Other OTC: UBGXF - news) . Q1 GDP growth disappoints, jobless claims rise

* Shorter maturities hold firm on gradual U.S. rate-hike

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* Surprise BOJ inaction stokes safehaven bids for bonds

* U.S. sells $28 bln in seven-year debt to strong demand

(Updates market action, adds quote)

By Richard Leong

NEW YORK, April 28 (Reuters) - U.S. Treasury prices rose on

Thursday with the two-year yield hitting one-week lows as news

of anemic first-quarter economic growth increased traders'

skepticism over whether the Federal Reserve would raise interest

rates in June.

Losses on Wall Street stocks and the Bank of Japan's

surprise decision to hold off on more stimulus also stoked

safehaven bids for U.S. government debt, analysts said.

Strong demand at a $28 billion auction of seven-year debt

added to an afternoon pop in bond prices.

"It (Other OTC: ITGL - news) was a disappointing (growth) number and we are at full

employment. I don't see the Fed going in June at this point,"

said John Bredemus, vice president of Allianz Investment-U.S. in

Minneapolis.

U.S. gross domestic product grew 0.5 percent in the first

quarter, its slowest pace in two years, while jobless claims

climbed from a 42-1/2-year low last week.

The poor GDP reading intensified doubts on further rate

hikes even after the Fed hinted it might consider such a move in

its policy statement on Wednesday.

Interest rates futures implied traders see a 15 percent

chance of a rate increase at the Fed's June 14-15 meeting

, down from about 20 percent on Wednesday, according to

Reuters data.

Two-year Treasury yields declined to 0.786

percent, the lowest in over a week, on diminishing chances of a

June rate increase.

In overnight trading, Treasury prices received a safe-haven

boost after the Bank of Japan surprised investors by refraining

to cut rates deeper into negative territory to help its sluggish

economy. The BOJ decision rattled global stock markets and sent

the yen soaring.

Longer-dated Treasuries lagged their shorter maturities as

underlying domestic inflation accelerated faster than

expected in the first quarter to above the Federal Reserve's 2

percent goal, eroding the appeal to hold them versus

shorter-term debt.

The government said the core rate on personal consumption

expenditures, the Fed's preferred inflation gauge, rose 2.1

percent in the first quarter, stronger than the 1.9 percent rate

forecast among economists polled by Reuters.

The selling in longer-dated Treasuries faded following the

robust seven-year note auction and growing losses in U.S.

stocks.

Benchmark 10-year Treasury notes were up 8/32 in

price for a yield of 1.831 percent, down 3 basis points from

Wednesday and below a near five-week high of 1.941 percent set

on Tuesday.

The 30-year yield fell nearly 1 basis point to

2.690 percent, retreating from a session high of 2.725 percent.

(Reporting by Richard Leong; Editing by Chizu Nomiyama and Alan

Crosby)