NEW YORK (CNNMoney.com) - Treasury prices fell Wednesday, raising the yield on the 10-year note to its highest level in nearly four years, as economic reports boosted expectations the Federal Reserve will raise interest rates after May.

The dollar fell against the euro and the yen.

The 10-year Treasury note sank 8/32 to 95-11/32 to yield 5.10 percent, up from 5.08 late Tuesday. Earlier, the yield on the benchmark note hit 5.11 percent, marking the first time it had breached the 5.10 mark since May 2002. Bond prices and yields move in opposite directions.

The benchmark yield topped 5 percent on April 13 for the first time since June 2002. The yield on the 10-year note has jumped nearly three quarters of a percentage point in the past three months as investors bet that inflation will pick up - and that the Federal Reserve will raise short-term rates more than originally expected.

The 30-year bond lost 12/32 to 89-21/32 to yield 5.18 percent, up from 5.16 the previous session.

The five-year note fell 6/32 to yield 5.01 percent, while the two-year note was down three ticks, yielding 4.98 percent. The two-year Treasury note's yield rose above 5 percent for the first time since January 2001, after the Fed's Beige Book report said economic activity continued to expand in March and the first half of April.

New home sales also posted the biggest jump in 13 years in March, surpassing economists' expectations, the government reported.

Earlier, new orders for U.S.-made durable goods in March jumped by 6.1 percent, helped by aircraft, computer and manufacturing orders. Economists polled by Reuters had expected a 1.6 percent increase.

Bond prices slipped on the news as traders speculated that indications of economic strength will influence the Fed to extend its 21-month rate hike campaign.

Economists widely expect the central bank's policymakers to raise their short-term rate target to 5 percent next month, but whether they'll keep boosting rates after that meeting remains unclear.

"You have a Fed that is obviously going to move to 5 percent on May 10, while the majority of the recent data have surprised to the upside, and there is a growing perception the Fed may have to go even higher," John Canavan, market analyst at research company Stone & McCarthy in Princeton, New Jersey, told Reuters.

Looking ahead, bond traders will focus on Fed Chairman Ben Bernanke's testimony Thursday before a Congressional hearing on the economic outlook. They'll also take in the first look at first-quarter gross domestic product, the broadest measure of the nation's economic activity, due Friday.

In currency trading, the euro bought $1.2453, up from $1.2432 late Tuesday. The dollar bought ¥114.71, down from ¥114.82 in the previous session.

--from staff and wire reports

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