NEW YORK (CNN/Money) - Yields on U.S. Treasurys climbed to three-month highs Monday as investors continued to sell fixed-income securities following Friday's strong payroll report and a better-than-expected report from the services sector.

At about 3:40 p.m. ET, the benchmark 10-year note fell 17/32 of a point to 98-9/32 to yield 4.21 percent, up from 4.14 percent late Friday, and the 30-year bond shed 30/32 of a point to 104-28/32 to yield 5.04 percent, up from 4.98 percent late Friday.

The two-year note fell 2/32 to 99-8/32 to yield 1.89 percent, its highest since early January, and the five-year note dropped 10/32 to 97-17/32 with a yield of 3.21 percent. Bond prices and yields move in opposite direction.

Friday, the Labor Department said payrolls outside the farm sector grew by 308,000 jobs in March, compared with a revised gain of 46,000 in February. The unemployment rate, which is generated by a separate survey, rose to 5.7 from 5.6 percent.

Economists, on average, had expected 123,000 new jobs and unemployment at 5.6 percent, according to Briefing.com.

It was the strongest gain in payrolls since a matching gain of 308,000 in April 2000.

The payroll report coupled with Monday's report showing the Institute for Supply Management's non-manufacturing index surged to 65.8 in March, a 12th straight monthly increase, from 60.8 in February led many to anticipate a rate hike by the Fed in the not too distant future.

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"At some point the Fed has to decide how strong do we want this economy," said Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets in New York.

Bond investors fear inflation because it eats away at the principal of the note as rates rise to keep pace with the level of inflation and the Federal Funds rate.

The dollar, meanwhile, hit a four-month high against the euro and gained some lost ground versus the Japanese yen.

The euro bought $1.2015, down from $1.2134 late Friday. The dollar bought ¥104.99, up from ¥104.56 late Friday and recovering from a four-year low of about ¥103.38 it touched last week.