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* U.S. 1st-quarter GDP comes in weaker than expected
* U.S. core PCE inflation gauge 2 percent
* U.S. labor costs rise in 1st quarter
* June Fed rate hike chances seen higher after GDP data (Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 28 (Reuters) - U.S. Treasury prices ended higher on Friday on last-minute month-end buying, reversing losses fueled by data showing steady growth in U.S. inflation and wages despite soft economic growth in the first quarter.
Expected month-end changes to portfolio benchmarks supported long-dated Treasuries, said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.
Afternoon market movements nullified the earlier rise in yields, which move inversely to prices, following a mixed report on U.S. gross domestic product. Data showed the U.S. economy in the first quarter grew at its slowest pace in three years, but details of the report suggested a more upbeat outlook.
GDP grew at a 0.7 percent annual rate, the weakest since the first quarter of 2014. First-quarter U.S. employment costs rose 0.8 percent, higher than market expectations, an indication of rising wage growth.
But there were positive elements. The core inflation measure, the PCE index, was 2 percent, compared with 1.3 percent in the fourth quarter. The headline PCE deflator was also up, by 2.4 percent. These figures suggested a build-up in inflation, which should keep the Federal Reserve on track to raise benchmark U.S. interest rates at least twice this year.
Rate futures have priced in a 71 percent probability of a Fed policy tightening in June after the GDP data, up from about 68 percent before the report's release.
"We continue to forecast two additional FOMC interest rate hikes in 2017, to be followed by two ... in 2018," said John Herrmann, director of interest rates strategy at MUFG Securities in New York.
In late trading, benchmark 10-year U.S. Treasury notes were up 3/32 in price to yield 2.285 percent, down from 2.296 percent late on Thursday. Yields earlier hit session highs of 2.338 percent in the wake of the U.S. GDP data.
U.S. 30-year bond prices rose 6/32, yielding 2.954 percent, down from Thursday's 2.965 percent.
On the front end, U.S. two-year yields were at 1.269 percent , up from Thursday's 1.258 percent.
Next week, the Fed will hold a monetary policy meeting, with investors widely expecting the U.S. central bank to hold rates steady. Investors will instead focus on the post-meeting statement and its signals for subsequent meetings.
"We believe the Committee's goal will be to acknowledge the softer run of data while still keeping June on the table as a live meeting," said JP Morgan economist Michael Feroli in New York. (Editing by Bernadette Baum and James Dalgleish)