* Fed says unemployment to decline under appropriate policy * U.S. GDP shows unexpected contraction in fourth quarter * Treasury sells $29 billion of 7-year notes By Chris Reese NEW YORK, Jan 30 (Reuters) - U.S. Treasury debt prices traded at lower levels for a fifth day on Wednesday after the Federal Reserve said economic growth will proceed at a moderate pace and unemployment will gradually decline under appropriate monetary policy. The central bank also reiterated in a statement following its two-day policy meeting it will continue its current economic stimulus programs, buying mortgage and U.S. government debt, until the labor market improves "substantially." "The statement came out pretty much not only as I expected, but as the market expected. No change in timing of the bond purchases; that's probably what most people are looking for. The market reacted in a way that said the Fed delivered what was expected - little movement," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. Treasuries began the day trading lower as investors pushed for price concessions amid auctions of $99 billion of U.S. government debt this week. Prices of U.S. government debt briefly moved higher after data showing a surprise contraction in gross domestic product in the world's biggest economy in the fourth quarter. Prices returned to negative territory however as analysts pointed to some positive signs for economic growth in the components of the report, like rising consumer spending. The Treasury on Thursday sold $29 billion of seven-year notes, after having sold $35 billion of two-year notes on Monday and $35 billion of five-year notes on Tuesday. Investors typically try to push Treasuries prices down around the time of such auctions. Following the release of the Fed's policy statement, benchmark 10-year notes were trading 4/32 lower in price to yield 2.012 percent, up from 2.001 percent late Tuesday. Yields on benchmark notes have been testing the 2 percent level since Monday, breaching that figure for the first time since April. But yields did not get traction above that level until Wednesday, helped by a bump in risk appetite in Asian trading overnight. Investors are now waiting for non-farm payrolls data on Friday. The Fed wants the unemployment rate to drop closer to 6.5 percent from the current 7.8 percent.