NEW YORK (CNNMoney.com) - Treasury prices slipped and the dollar rallied Thursday after February existing home sales posted their biggest gain in two years, sparking worries about unexpected economic strength that could lead the Federal Reserve to be more aggressive in raising interest rates.

The benchmark 10-year Treasury note fell 9/32 to 98-4/32 to yield nearly 4.74 percent, up from 4.71 percent late Wednesday.

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The 30-year bond sank 17/32 to 95-30/32, yielding 4.75 percent, up from 4.73 in the previous session. Bond prices and yields move in opposite directions.

The five-year note fell six ticks to 98-31/32, yielding 4.73 percent, while the two-year note fell one tick to yield 4.77 percent.

Sales of existing homes jumped 5.2 percent February, the National Association of Realtors reported, the biggest gain since a 5.9 percent jump in February 2004.

Jobless claims sank last week to 302,000 from 313,000 the prior week.

Bond prices fell as investors worried that the Fed might have to boost rates further to head off inflation. Bond investors hate inflation since it erodes the value of their fixed-rate investments.

In currency trading, though, the dollar jumped on the housing numbers. Higher rates tend to make a currency more attractive to investors.

The euro bought $1.1968, down from $1.2077 late Wednesday, while the dollar rose to ¥117.95, up from ¥117 in the previous session.

Looking ahead, bond and currency traders will be awaiting reports on February new home sales and durable goods orders due out Friday morning.

Thursday marked the third straight session that the yield on the two-year Treasury note exceeded that of the 10-year.

The nation's last two recessions were preceded by a so-called "inverted yield curve," an unusual situation when short-term Treasury yields are higher than long yields.

But an inverted curve has also signaled economic slowdowns, rather than recessions, in the past, and some analysts, including Fed Chairman Ben Bernanke, have said the bond market probably isn't pointing to economic problems ahead.

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