Fed's Daly: Rise in Long-Term Yields Is a Global Issue

San Francisco Federal Reserve President Mary Daly said in a Bloomberg Television interview on Thursday that the recent rise in long-term U.S. Treasury yields is not unique to the United States, but rather a global issue. She also emphasized that she does not believe the Fed's credibility is at risk, downplaying market concerns about the central bank's policy path.

**Global Factors Driving Yields Higher**

Daly's remarks echo recent market analysis. Some Wall Street institutions believe the factors pushing up yields extend beyond short-term inflation concerns. According to strategists at ING, Goldman Sachs, and Barclays, even if the upward pressure on oil prices from geopolitical conflicts eases, the surge in long-term yields is unlikely to fully reverse. Barclays' head of U.S. inflation strategy pointed out that rising debt levels, a potentially higher neutral interest rate, and factors such as artificial intelligence may be jointly lifting real rates, making higher borrowing costs the new normal.

**Market Pricing Reflects More Complex Expectations**

Analysis models from J.P. Morgan Private Bank also show that the recent unusual moves in Treasury yields are primarily driven by two factors: stronger economic growth expectations and higher macroeconomic uncertainty. This aligns with Daly's view that the issue is global, indicating the market is repricing a potential reversal in the global balance of savings and investment. Economists note that the trend that has kept global borrowing costs low over the past five decades may be shifting, and markets need to prepare for a higher-rate environment in the post-financial-crisis era.