Investing.com -- Federal Reserve Governor Christopher Waller said Tuesday that the recent increase in US bond yields stems from stronger economic growth rather than inflation concerns, which he described as "well anchored."

Yields on 10-year US Treasury debt have reached 24-year highs in recent days. Analysts have attributed this to concerns about war-driven inflation, expanding government debt, and large-scale investment in artificial intelligence.

Waller, speaking at a Bloomberg event in Mumbai, dismissed inflation as a primary factor in the bond selloff. He pointed instead to economic strength, AI spending, and broader debt concerns.

"Inflation expectations are well anchored, so all of the build-up (in yields) is not coming from an inflation premium," Waller said. "That's not where it's coming from. So it is a factor of real growth."

The Fed governor referenced academic research indicating that US government debt has lost some of its status as a global safe-haven asset over the past two years. This has reduced demand and potentially added 50 to 70 basis points to yields.

"That's another reason your rates are going to go up if you lose that convenience yield," Waller said. "And it's not a trivial sum. It could be like 50 to 70 basis points."

Waller said AI investment, including data center construction, is supporting economic demand and could continue for another two or three years. He noted that meaningful productivity gains from AI are still "a few years out."

He also said Fed policy plays a limited role in driving long-term borrowing costs, stating that changes in the overnight cost of money are "not driving the 10-year yield much."

The Fed raised rates last month, and Waller recently indicated further increases were likely.

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