NEW YORK (CNNMoney.com) - Bonds fell Friday, as investors feared that higher inflation could prompt the Federal Reserve to keep raising interest rates.

The dollar was lower against the euro and the yen.

The 10-year Treasury note fell 14/32 to 99-13/32 to yield 5.19 percent, up from 5.15 late Thursday. The benchmark yield hit its highest level since May of 2002.

The 30-year bond declined a full point to 87-30/32, yielding 5.30 percent, up from 5.23 in the previous session. Bond prices and yields move in opposite directions.

The five-year note slipped 7/32 to yield 5.08 percent, while the two-year note was down one tick yielding 5 percent.

The Fed raised interest rates to 5 percent earlier in the week, leaving open whether it will pause in monetary tightening or raise rates further depending on incoming economic data.

The University of Michigan's preliminary May index of consumer sentiment fell to 79.0, a seven-month low, in May. Economists had forecast that the index would fall to 86 from 87.4 in April.

But investors largely shrugged off the report. "If this has had a positive impact on bonds, it's rather elusive," David Ader, government bond strategist at RBS Greenwich, told Reuters. "The market continues to trade poorly."

In earlier economic news, the Commerce Department reported that imports outstripped exports by $62 billion, down from the revised $65.6 billion in February. (Full story.) Economists surveyed by Briefing.com had forecast a $67 billion trade gap in March.

China reported that its trade surplus in April jumped to $10.5 billion from $4.6 billion a year earlier, well above the forecast of $9 billion in the most recent period. The gap is seen increasing U.S. political pressure on China to allow its yuan to appreciate against the dollar.

In currency trading, the euro bought $1.2925, up from $1.2842 late Thursday. The dollar traded at ¥110.03, down from ¥110.54 in the previous session.

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Stocks slump Friday - full story here.

Oil down on lower global demand forecast - full story here.