* Treasury to sell $29 bln of seven-year notes
* Yields briefly rise as data shows solid economic growth
* 5-yr, 30-yr yield spread tightest since 2009
* Fed to buy $3.75 bln-$4.50 bln notes due 2018, 2019
NEW YORK, March 27 (Reuters) - Intermediate-dated Treasuries yields edged higher Thursday, and the yield curve resumed a recent flattening trend, as investors prepared for $29 billion of new seven-year notes, the final sale of $96 billion in new coupon-bearing supply this week. Seven-year notes often see less demand from central banks and other buyers than five-year notes. A $35-billion sale of five-year notes on Wednesday saw strong demand from indirect bidders, including fund managers. Still, a dramatic run-up in yields over the last week may help demand, though yields have come off their post-Federal Reserve-meeting highs. Intermediate-dated Treasuries yields had jumped after Federal Reserve Chair Janet Yellen said the central bank could raise interest rates six months after its current bond-buying program ends, suggesting a potential rate hike as early as spring 2015, sooner than many expect. "We backed up a little bit after the Fed meeting ... there haven't been any recent issues with supply," said Lou Brien, a market strategist at DRW Trading in Chicago. Seven-year notes were last down 3/32 in price to yield 2.27 percent. The notes yields have fallen from a three-month high of 2.34 percent on Monday, but remain higher than the 2.14 percent area they traded at before Yellen's comments. Traders expect the new seven-year notes may price at yields of 2.28 percent, according to trading in the "when issued" market. The spread between yields of five-year notes and thirty-year bonds narrowed to 180 basis points on Thursday, its tightest in five years. Intermediate-dated debt has underperformed longer-dated bonds since Yellen's comments, as investors adapt to the possibility of rate hikes sooner than expected. Demand for Treasuries heading into the quarter's end this week may also help demand in the auction. Treasuries have been supported by safe-haven buying spurred by ongoing tensions over Ukraine, and as U.S. stocks have struggled to break above recent highs to new records. Economic data on Thursday showed sturdy growth. The number of Americans filing new claims for unemployment benefits fell unexpectedly last week to its lowest in nearly four months, suggesting a strengthening labor market. U.S. economic growth was 2.6 percent in the fourth quarter, up from the 2.4 percent the Commerce Department estimated last month, reflecting a stronger pace of consumer spending than previously estimated. Benchmark 10-year notes were last unchanged in price to yield 2.70 percent, after edging as high as 2.72 percent immediately after the data. The Fed will purchase between $3.75 billion and $4.50 billion in notes due in 2018 and 2019 on Thursday.
(Editing by Bernadette Baum)