NEW YORK (CNN/Money) - Treasury bond prices tumbled Monday, driving yields to the highest levels in seven months, as investors worried that a pickup in the economy will lead to higher interest rates headed for the exits.

The shift in sentiment over the past month is creating its own momentum as dealers, suspecting the end of a lengthy bull market in bonds, dumped Treasury securities, according to dealers and bond analysts.

The benchmark 10-year note skidded 1-5/8 points in price to 95-5/16, driving its yield up to 4.21 percent from 3.99 percent late Friday. The 30-year bond tumbled 2-13/32 points to 104-5/32 to yield 5.09 percent, up from 4.92 percent late Friday. Bond prices and yields move in the opposite direction.

Bonds began their retreat when the Federal Reserve cut interest rates by just a quarter-percentage point in late June, instead of the half-percentage point some investors counted on, but at the same time did not move to buy Treasurys, as some investors had been betting.

Federal Reserve Chairman Alan Greenspan's Congressional testimony last week, which was fairly upbeat about the economy's prospects and characterized the chance of deflation as remote, further fueled the selling as investors worried that the pace of economic growth will pick up soon, pushing rates higher still and possibly causing a pickup in inflation.

Inflation is a bond investors' worst enemy since it erodes the value of long-term investments.

Monday's selling came as the latest reports pointed to signs of a pickup in the economy.

A key economic forecasting gauge rose in June for the third consecutive month, the Conference Board said, suggesting the struggling economy will strengthen in the second half of the year.

And strength in retail chain store sales reports also pressured bonds. An upbeat sales report from discounter Wal-Mart (WMT: Research, Estimates) sparked speculation that economic growth would pick up sharply in the current quarter.

The strength in store sales suggests that lower tax rates could boost retail spending, giving a lift to the overall economy. "There's more of a boost (for the economy) ahead," said Anthony Crescenzi, bond analyst at Miller, Tabak & Co.

Bonds fell along with stocks, hurt by a worse-than-expected quarterly report from Dow component Merck (MRK: Research, Estimates).

The five-year note declined 27/32 of a point in price to 98-2/32 with a yield of 3.06 percent, and the two-year note slid 7/32 of a point to 99-2/32 with a yield of 1.61 percent. Bond prices and yields move in opposite directions.

Meanwhile, the euro bought $1.1351, up from $1.1273 late Friday. The dollar bought ¥118.47, up slightly from ¥118.37 late Friday.

This week's economic data calendar is fairly light; no major economic data is scheduled for release until Thursday.  

--from staff and wire reports