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Treasurys extend losses after Fed announcement

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U.S. bonds moved lower after the Federal Reserve dropped the unemployment rate as its definitive yardstick for gauging the U.S. economy's strength and made clear it would rely on a wide range of measures in deciding when to raise interest rates.

At the same time, the U.S. central bank said dropping a promise to hold rates steady "well past the time" the U.S. unemployment rate falls below 6.5 percent did not indicate any change in the Fed's policy intentions.

Wall Street reacted with a modest selloff with major indexes falling to session lows shortly after the statement from the Fed's latest policy meeting.

(Read more: Short-term yields rise, bank stocks rally on Fed)

"This statement from the Fed is as hawkish as it gets - the only thing they did not do is (raise) rates today. The Fed is at neutral now and expect rate hikes to begin sometime in early 2015," said Thomas di Galoma, head of fixed-income rates at ED&F Man Capital Markets in New York.

Benchmark 10-year Treasury notes were 27/32 lower in price with a yield of 2.77 percent, while 7-year Treasury notes fell 28/32 in price to yield 2.29 percent.

The central bank proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.

—By Reuters

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