The bond market is no haven: Investors can lose money — and lately, most of them are.

Bond yields soared for a second consecutive day on expectations of improved economic growth, as well as concern that President Obama's agreement to extend the Bush-era tax cuts could exacerbate the budget deficit and kindle inflation.

The benchmark 10-year Treasury note, which bottomed at 2.39% in early October, jumped to 3.23% on Wednesday from 3.16% on Tuesday. The 30-year Treasury bond rose to 4.44% from 4.42%.

That continued a steady run-up over the last month that has pushed yields to their highest levels since early summer.

The rise could spook small investors who sought refuge over the last two years from the volatility of the stock market and the negligible returns of money-market funds and bank savings accounts.

As rates rise, the value of older, lower-yielding bonds and bond mutual funds falls.

Driven by interest rates that have fallen lower than most experts ever expected, the bond market has enjoyed a largely uninterrupted bull market over the last two decades. But some experts believe that the rally is coming to a close, with rates likely to rise from historic lows.

"Investors who got out of stocks and went into bonds for safety and security thought they had it made in the shade," said Marilyn Cohen, president of Envision Capital Management, a West Los Angeles firm specializing in bonds for small investors.

"Well, they did for two years, but it's over. A lot of retail investors who look at their bond funds have got to be freaked out," she said.

Some people appear to dumping bonds to buy stocks.

The Dow Jones industrial average climbed 13.32 points Wednesday to 11,372.48, and is up 3.9% since the early-October low in the 10-year Treasury. The Russell 2000 index of small-company stocks hit a new three-year high Tuesday.

A continued rise in rates would be welcome news to savers, but it could damage the still soft housing market. Mortgage rates are tied to 10-year Treasury yields.

Several factors have pushed up bond yields over the last month.

Rumors that the Federal Reserve would resume a bond-buying program to spur the economy sparked a rally in the fall. But bonds weakened after the effort was unveiled Nov. 3 because of fear it could increase the deficit and spur inflation once the economy improved.

At the same time, a stream of better-than-expected corporate and economic data in recent weeks has stirred hope that the recovery is gaining steam, albeit slowly. Yields typically rise during upturns as demand for money increases.

President Obama's deal with congressional Republicans to extend tax cuts for two years sparked new consternation about the deficit.

The $900-billion tax-cut extension, and the accompanying cut in payroll taxes, could reduce unemployment half a percentage point or more, according to economists. But next year's deficit would grow between $200 billion and $300 billion from the projected $1.26 trillion, according toBank of America Merrill Lynch.

Amid partisan rancor in Washington, fixed-income investors are growing disconsolate about the unwillingness of lawmakers to tackle the deficit.

"The message to the bond market is loud and clear: Congress' No. 1 priority with the budget deficit is to make it larger," said James Bianco, president of Bianco Research in Chicago.

The rise in yields could be a rude surprise for small investors.

Investors poured a net $267 billion into bond mutual funds in the first 10 months this year, after pumping a record $375 billion into the funds last year, according to the Investment Company Institute.

By contrast, stock mutual funds saw a net $30 billion in cash flow out in the first 10 months of this year.

Though nearly all bond-fund categories have positive returns for the year, almost all of them have taken a shellacking in the last month.