* Fed said it would cut buying to $75 bln per month from $85 billion
* Fed hints key interest rate to stay lower for longer
* Curve steepening trades unwinding
* Middle of the curve underperforms amid supply
* Treasury to sell $29 billion in 7-year notes at 1 p.m.
NEW YORK, Dec 19 (Reuters) - U.S. Treasuries prices fell on Thursday a day after the Federal Reserve said it would trim its monthly bond-buying program by $10 billion and signaled it might keep its key interest rate extremely low even longer than previously promised.
The market reacted negatively on Wednesday after Chairman Ben Bernanke said the U.S. central bank may continue to reduce purchases steadily, suggesting that quantitative easing could end by around the end of 2014.
"The FOMC decided to cut the pace of its asset purchases to $75 billion a month, but offset this with a qualitative enhancement to the forward guidance," said Goldman Sachs economists in a research note.
The Fed's assessment of the U.S. economic outlook was "somewhat more upbeat" and its statement "slightly hawkish relative to expectations," the economists said.
In light of this, a sharp jump in new jobless claims in the latest week to 379,000 and an upward revision to the number of the prior week's new claims offered the market little support.
Jefferies' chief financial economist Ward McCarthy said the jump in jobless claims should be seen in the context of volatility around the holidays and not as an indication of a sudden deterioration of the labor market.
Five-year notes underperformed after Wednesday's poorly bid auction. Seven-year notes, which the Treasury will auction at 1 p.m. (1800 GMT) on Thursday, also underperformed.
"There was talk of Asian real money selling five- and seven-year maturities in decent size vis-a-vis the long-end," said Thomas di Galoma, co-head of fixed-income rates at ED&F Man Capital in New York. "Steepening trades are coming off and forcing the belly of the curve lower in price."
The Fed is expected to buy Treasuries in both the five-year and 30-year sectors as part of its ongoing bond-buying program aimed at stimulating economic activity.
The market will get data on existing home sales and regional manufacturing later in the session.
On Wednesday, the Fed said that it would cut its bond purchases to $75 billion per month, starting in January. It also said it probably would keep the federal funds rate at zero to 0.25 percent well past the time that the U.S. unemployment rate falls below 6.5 percent, especially if inflation remains below 2 percent.
On the open market, benchmark 10-year Treasury notes were down 15/32 in price, their yields rising to 2.94 percent. The 30-year bond price was down a point, yielding 3.91 percent.
Supply could remain a source of pressure on the Treasury market. In addition to the $35 billion in five-year debt sold on Wednesday, the Treasury will sell $29 billion in seven-year notes and $16 billion in five-year Treasury inflation-protected securities on Thursday.