An unusual jump in bond yields could mean the US government will be forced to pay higher rates on the trillions of dollars in new bonds to finance economic rescue efforts, or worse, lead to a loss of confidence in the Treasury market, say analysts.

Moreover, a jump in bond yields could push up rates for mortgages and other loans tied to Treasury bonds, hurting economic recovery efforts.

The yield on the 10-year US Treasury bond had surged half a point to 2.844 on Friday from 2.304 percent before the January 20 inauguration. A similar rise has pushed the 30-year bond yield to 3.603 percent from 2.894 percent.

Some of the jump in yields may be the result of an unwinding of the "bubble" in Treasury bonds or "fear trade" from global investors rushing to buy what are seen as the safest investments in the world.

But some economists say comments from new Treasury Secretary Timothy Geithner about China's "manipulation" of its currency could alienate one of the biggest buyers of US Treasury bonds and lead to increased trade friction.

"The Treasury market seems to remain somewhat unnerved by last week's saber-rattling about China's currency policy," says Kevin Giddis, a bond market analyst at Morgan Keegan.

"Leveling the playing field of global trade may be a noble cause, but it's not so clear that now is the best time to aggravate our nation's largest creditor."

Economists estimate the US will issue as much as 2.5 trillion dollars in new debt in the coming year. Although the government up to now has easily found buyers for these bonds, any hint of trouble could be devastating.

Scott Anderson, economist at Wells Fargo, said: "While the US Treasury Department has one of the best credit lines in the world -- like your own credit card -- there is a finite credit limit."

Obama's new administration said it will determine in the coming months whether China is manipulating its currency, setting the stage for a new round of trade friction with Beijing.

Under the Bush administration, the Treasury had stopped short of identifying China a currency manipulator in its semiannual global currency reviews, acknowledging however that the yuan was relatively undervalued against the US dollar.

By directly branding China, Obama has laid the groundwork for trade friction between the key powers, both reeling from global financial turmoil that has slammed the brakes on growth and triggered a host of domestic problems.

"Why are we picking a fight with China?" says David Kotok at Cumberland Advisors, who said the action suggested a move toward protectionism.

"How does the Obama administration believe that launching a fight with China is beneficial? In the 1930s the severe recession of 1929-1931 was turned into the depression of 1931-1933 because of protectionism."

The market is also watching to see if the Federal Reserve goes ahead with plans to buy up Treasury bonds in an effort to influence interest rates it does not directly control, to stimulate the recession-plagued economy.

Wells Fargo's Anderson said there remains concern about the notion "of trading government IOUs for Fed IOUs" which could undermine confidence in US bonds.

The risk, said Anderson, is that "the market could determine that the emperor has no clothes, and you could see a spike in interest rates and a collapse in the dollar."

Ed Yardeni at Yardeni Research said increases in the 10-year Treasury yield "mean increases in mortgage rates" and that this has led to a jump in mortgage rates from a low of 4.89 percent to 5.24 percent in late January.

"That's not a good development," he said. "At this time, the only fast way to stimulate the economy is to give borrowers an opportunity to refinance their mortgages."

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