* U.S. 1st-quarter GDP revised sharply lower * GDP tempers expectations of Fed bond-buying slowdown * Treasury will sell 5-year notes later in the day By Luciana Lopez NEW YORK, June 26 (Reuters) - Prices for U.S. Treasuries gained on Wednesday after a recent slump took yields to near two-year highs, with weaker-than-expected U.S. economic growth in the first quarter pointing to continued potential for fragility in the world's biggest economy. Economic growth in the first quarter was hobbled by moderate consumer spending, weak business investment and declining exports, data from the Commerce Department showed on Wednesday. The government revised down its final estate on gross domestic product to a 1.8 percent annual rate, down from a previously reported 2.4 percent pace. "That has the market thinking that the Fed will not be tapering perhaps as soon as what the market was thinking just the other day," said Wilmer Stith, co-manager of the Wilmington Broad Market Bond Fund in Baltimore. With markets now more skeptical of a September start date for a Federal Reserve reduction in its bond purchases, he said, Treasuries could see more volatility. Data will be key, with any figures below expectations boosting hopes the Fed will keep its stimulus in place. If economic data is weak, "the punch bowl stays where it is. Good news, economically, the punch bowl gets moved a little bit further away," Stith said. Some analysts said that upcoming data, including labor market data for the month of June due out at the end of next week, could carry more weight in the Fed's decisions than the first-quarter GDP. "With Q1 now well in the rear-view mirror, next week's data from the ISM and non-farm payrolls may still be more important in determining when and by how much the Fed tapers QE," Andrew Grantham, an economist with CIBC World Markets Economics in Toronto, said. The 10-year note on Wednesday rose 13/32 in price to yield 2.565 percent, from 2.614 percent on Tuesday. The 30-year bond rose 16/32 in price to yield 3.599 percent, compared with 3.628 percent late on Tuesday. Global investors had shed assets from stocks to bonds since last Wednesday, when the Fed's chairman, Ben Bernanke, suggested the central bank could slow its bond buying program as the economy improves. The prospect of the Fed decreasing or ending its monthly purchases of $85 billion in Treasuries and mortgage-backed securities sent markets into a tailspin, with yields on the benchmark 10-year note reaching their highest since August 2011. The jump in yields, in fact, was a surprise, the president of the Minneapolis Fed, Narayana Kocherlakota, said on Wednesday. The market reaction was "more outsized than I would have anticipated personally," Kocherlakota, a dovish U.S. central bank official who has a vote on the Fed's policy committee next year, said on CNBC television. The current yields could draw in investors later on Wednesday, when the Treasury will sell $35 billion in five-year notes. The Treasury sold $35 billion in two-year notes on Tuesday at a yield of 0.43 percent, the highest since May 2011, and will sell $29 billion in seven-year notes on Thursday. As part of its asset purchase program, the Fed on Wednesday bought $3.136 billion of Treasuries maturing August 2020 through February 2023.