By Ellie Ismailidou, MarketWatch

Treasury prices rebounded from early losses Thursday, pushing down yields, as investors sought safety when German lender Deutsche Bank sparked a selloff in stocks.

Treasury yields, which move in the opposite direction of prices, turned solidly lower after Bloomberg reported that a handful of Deutsche Bank's (DBK.XE) (DBK.XE) derivatives-clearing clients had removed excess cash and positions (http://www.marketwatch.com/story/deutsche-bank-shares-tumble-after-report-says-some-clients-reduce-collateral-on-trades-2016-09-29). Deutsche Bank's U.S.-listed shares were down by around 7% after the report, while U.S. stocks sold off (http://www.marketwatch.com/story/wall-street-stocks-could-struggle-as-euphoria-over-opec-deal-fades-2016-09-29), led lower by financials.

See:Deutsche Bank crisis threatens to roil global markets (http://www.marketwatch.com/story/a-crisis-in-european-banks-threatens-to-roil-global-markets-2016-09-28)

(http://www.marketwatch.com/story/a-crisis-in-european-banks-threatens-to-roil-global-markets-2016-09-28)Also read:Deutsche Bank shareholders in for more pain (http://www.marketwatch.com/story/more-pain-in-store-for-deutsche-bank-shareholders-2016-09-28)

The yield on the benchmark 10-year Treasury note erased an earlier gain to fall 0.9 basis point to 1.558%, according to Tradeweb. One basis point is equal to one-hundredth of a percentage point.

The yield on the two-year Treasury note , which is most sensitive to rate changes, fell 0.4 basis point to 0.75%. And the yield on the 30-year Treasury bond , which is the most sensitive to long-term growth and inflation expectations, declined 1 basis point to 2.278%.

On the economic data front, business investment wasn't nearly as weak as previously reported, leading the government to ratchet up its estimate of second-quarter GDP to 1.4% from 1.1% (http://www.marketwatch.com/story/second-quarter-gdp-raised-to-14-from-11-2016-09-29).

Meanwhile, applications for first-time unemployment benefits rose 3,000 to 254,000 in late September (http://www.marketwatch.com/story/jobless-claims-rise-slightly-to-254000-2016-09-29), but the low level of initial claims pointed to a steadily improving labor market.

Yields had already retreated somewhat after a gauge of pending home sales fell in August to the lowest level in seven months (http://www.marketwatch.com/story/pending-home-sales-slide-to-lowest-in-seven-months-2016-09-29), signaling more choppiness in a housing market starved for inventory.

In Europe, the yield on Germany's 10-year bond known as the bund, rose 3.6 basis points to negative 0.116%, according to Tradeweb.

Even as analysts cheered the increase of second-quarter GDP growth, many still thought that the fresh data were unlikely to influence the Federal Reserve's next moves with interest rates.

"It's nice to see an upward revision, but the [growth rate] still has a one-handle," said R.J. Gallo, a fixed-income portfolio manager at Federated. According to Gallo, the fact that GDP growth remains below the 2% mark shows that the U.S. economy is expanding at a moderate pace that will enable the Fed to hike rates at a slow and gradual pace.

In this context, Treasury yields, which have been trading in a "very narrow range" should continue to tick higher in an incremental manner, without any significant jump, Gallo added.

Investors were also bracing for August PCE inflation data--the Fed's preferred inflation gauge--scheduled for release on Friday. It could offer fresh clues on whether inflation is rising toward the central bank's 2% target.

"If oil prices are headed higher from here, so will headline inflation in coming quarters," said Peter Boockvar, chief market analyst at The Lindsey Group, in an email.

According to Boockvar, higher inflation is "kryptonite to global bond markets" as it not only pushes long-term yields higher, but could also spark central banks to turn more hawkish, if inflation gets "closer to the 2% inflation they all crave."

(END) Dow Jones Newswires

September 29, 2016 14:12 ET (18:12 GMT)