Treasury (U.S. bonds) prices fell sharply in May sending yields skyrocketing marking the worst month since December 2010, as stronger than expected economic data caused worry the Federal Reserve might slow its bond purchases earlier than expected.

Treasury yields retested their highest levels in more than 13 months.

The benchmark 10-year Treasury note surged from a yield of 1.61% at the beginning of May to end the month at 2.16%, down slightly from the monthly high of 2.23% set days earlier.

As a result, commercial real estate loan rates increased accordingly as most lenders use the Treasuries as a basis (index) for setting interest rates. Commercial loan rates are comprised of an index and a spread. As Treasury prices slide, yields increase and therefore directly affect rates.

It's unclear if current Treasury prices will find a home in their current range as investors scale back purchases as concern grows that reduced Fed purchases will cause long-term yields to rise.

Investor concern mounts over uncertainty about how to get back to Treasury bond fair market value after the Fed tapers and eventually ends quantitative easing. Commonly called QE3, the Fed has committed to purchasing $85 billion in Treasuries and mortgage-backed securities.

At his congressional testimony last week, Fed Chairman Ben Bernanke said a decision to pare the Fed's current pace of bond purchases may happen at one of Fed's "next few meetings" if the economy looked set to maintain momentum.

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