* World shares slip as Fed hints at tighter policy
* 10-yr Treasury yields hit highest since May
* Dollar index extends rally
By Rodrigo Campos
NEW YORK, Jan 3 (Reuters) - U.S. Treasury debt prices slid and world stocks reversed course and dipped on Thursday after minutes from the latest meeting of the Federal Reserve's policy committee showed rising concern about the Fed's policy of buying bonds to stimulate growth.
The Federal Open Market Committee's minutes also extended a rally in the U.S. dollar, fueled earlier by concerns about more budget wrangling in Washington.
The December meeting minutes showed several of the central bank's officials were leaning toward slowing or stopping purchases well before the end of 2013. The program has been key
to a rally that has catapulted the U.S. benchmark S&P 500 index near a 5-year high.
"The surprise was the changes to duration and extent of that program in 2013, but given the tone in previous Fed meeting minutes, it should not have been an entire surprise," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Global equities retreated while the U.S. dollar climbed to a near four-week high against a basket of currencies on the Fed news, and also on concerns about another looming fight over spending and taxes in Washington.
The MSCI world equity index fell 0.3 percent after hitting an 18-month high on Wednesday.
The Dow Jones industrial average dipped 21.19 points, or 0.16 percent, to 13,391.36. The S&P 500 fell 3.05 points, or 0.21 percent, to 1,459.37. The Nasdaq Composite lost 11.70 points, or 0.38 percent, to 3,100.57.
A European equity benchmark ended up 0.45 percent after hitting its highest intraday level since March 2011, boosted by a belated reaction in Swiss stocks due to a holiday.
U.S.-dollar denominated Nikkei futures dropped 0.9 percent.
The euro fell to a three-week low against the U.S. dollar after the more hawkish Fed minutes. The single currency was last down 1 percent at $1.3051, in a second straight session of declines.
While the Fed said that it would keep up its stimulus program to boost the economy over coming months, December meeting minutes underscored an increasing reticence about further expanding the central bank's $2.9 trillion balance sheet.
"Several (officials) thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet," the minutes said.
Ten- and 30-year U.S. government debt prices fell sharply after the minutes were released. Prices for 10-year U.S. debt were down 21/32 to yield 1.9095 percent, up from 1.84 percent late on Wednesday and the highest since May.
"I think the bottom line is that the policy is likely to be in place for a while, but the minutes seem to be raising some doubts about the commitment to the policy," said Julia Coronado, chief North America economist at BNP Paribas in New York.
"This is going to be an ongoing issue for the Fed," she added. "We're in uncharted waters."
March Bund futures prices dropped 0.6 percent to their lowest in nearly a month.
Data suggesting some momentum in the U.S. economy as the year ended showed private-sector employers stepped up hiring in December, cutting losses in stocks and further supporting the greenback gains.
Data showing activity in China's services sector and at U.S. factories expanded in December brightened the outlook for global growth, also capping losses in risky assets.
Dragging on sentiment, U.S. President Barack Obama and congressional Republicans face two more months of tough talks on spending cuts and an increase in the nation's debt limit as the hard-fought deal to avert the "fiscal cliff" of automatic tax hikes and spending cuts covered only taxes and delayed decisions on expenditures until March 1.
"There's still some clouds over the horizon, with the fiscal issue of the government," said Jeff Meyerson, head of trading at Sunrise Securities in New York. "We don't know how they're going to pan out, but in all likelihood there's not going to be a calamity."