UPDATE 1-Yellen says US GDP is a 'good strong number', may keep bond yields higher

(Adds quotes, details on bond yields, deficits throughout)By David LawderWASHINGTON, Oct 26 (Reuters) - U.S. Treasury Secretary Janet Yellen on Thursday said U.S. third quarter economic growth of nearly 5% was "a good strong number" that points to a soft landing for the U.S. economy but could help keep longer-dated bond yields elevated."It's a good strong number and shows the economy is doing well," Yellen said at a Bloomberg live interview event. "What we have looks like a soft landing."The Commerce Department said U.S. GDP grew at the fastest pace in nearly two years, defying warnings of a recession as higher wages in a tight labor market fueled consumer spending and business inventory restocking.Yellen said the recent sharp rise in long-term bond yields is reflective of confidence in the U.S. economy and expectations that interest rates will be higher for longer as a result.Yellen, in a televised interview with Bloomberg, said it was also possible that yields on longer-dated bonds will come down in coming years, as structural conditions for a long-term decline in real interest rates related to U.S. demographics still exist."It's perfectly possible that we will see longer-term yields come down, but nobody really knows for sure," Yellen said. "I see the higher yields as certainly an important reflection of the stronger economy."She dismissed suggestions that higher bond yields may be due to worries about rising U.S. deficits or worries about a recession.The Treasury on Friday reported a $1.7 trillion federal budget deficit for fiscal 2023, the largest outside the COVID-19 pandemic years as revenues fell and outlays for Social Security, Medicare and interest costs rose sharply.Yellen said that the U.S. debt servicing burden would be a "bigger challenge if the interest rate path stays higher."She has maintained that the real interest rate costs for the federal government have remained close to 1% of GDP, a manageable level.Story continuesShe added that President Joe Biden's proposed fiscal sustainability measure, including tax hikes on the wealthy that would cut deficits by $2.5 trillion over a decade would keep debt costs manageable, at "well below 2%" of GDP.""The higher the interest rate path, the more that we need to do" on deficit reduction, she said.(Reporting By David Lawder and Daniel Burns; Editing by Franklin Paul and Jonathan Oatis)