Yields on 30-year T-bonds today hit a new year-to-date high. At 3.88%, they are now 135 bps above their all-time lows of last December. Of all the things that are bouncing these days, rising yields on Treasury bonds are potentially the most significant. Investors drove yields down to incredibly low levels last December, when fear was at its peak and expectations of a global depression and deflation were rampant. To be happy with a 2.5% 30-year Treasury bond, you would have to believe that a) the economy was in for a massive contraction, b) inflation was going to be negative for many years, and c) depression plus deflation would wipe out a huge percentage of the corporate bonds then in existence.
Well, now it's looking like depression and deflation are not so likely after all. Investors are now less eager on the margin to buy Treasuries, even though the Fed has promised to buy lots of them in order to keep yields low and thus help stabilize the housing market. Rising 10-year yields haven't yet pushed mortgage rates up, but the spread between mortgage rates and 10-year Treasuries is unlikely to fall much more. Regardless, you can get 30-year fixed rate conforming loans for 4.8% now, and rates on 30-year jumbos have dropped to 6.2%, according BanxQuote. The spread between jumbo and conforming loans is still very high from an historical perspective, so it could fall a lot more. I don't think fixed rates on conforming loans are going to fall much more, if at all (this may be your last chance to lock in the lowest rates on conforming loans in your lifetime), but jumbo rates could still decline some more even if Treasury yields move higher.
Rising yields on Treasuries are unlikely to kill the housing market recovery anytime soon. Instead, they are an excellent sign that the outlook for the economy is improving. Green shoots are everywhere.