Though many disagree about why Treasury yields have been rising, most agree their impact on the still fragile housing market isn’t good news for the U.S. consumer or by extension the U.S. economy.  Further fueling concerns have been rising risk premiums on mortgage-backed securities - not the toxic stuff, but the bonds backed by loans made to homeowners with solid credit credentials. Treasury yields and mortgage risk premiums together influence mortgage rates. The one-two punch should make it even more difficult for consumers to refinance or get an affordable loan for a new home purchase.

Citigroup analysts expect issuance of these prime mortgage bonds to fall by 30% in July as a result.

This comes despite the hundreds of billions of dollars the Federal Reserve and U.S. Treasury have spent supporting the mortgage market since the government made housing finance giants Fannie Mae and Freddie Mac wards of the state last September. Without such purchases the risk premiums would surely be higher, but if the trend continues confidence in the government’s ability to shore up the housing market is likely to crack and cheaper home financing with it.