(Photo: Rich Kareckas/AP)

(Bloomberg) — The slower-than-expected increase in worker pay shows that investors should feel safe in Treasuries, even after yields jumped in the past two weeks, according to PGIM’s Robert Tipp.

“Bonds are winning,” Tipp, the chief investment strategist at PGIM Fixed Income, said Friday on Bloomberg Television’s “Real Yield” program. “The fact we haven’t had wage growth is really exceptional. I think there’s a huge shadow supply of excess labor. The global competitiveness that’s out there is really keeping inflation below target around the world.” 

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Money managers are weighing mixed signals from both economic data and central bankers. Federal Reserve Chair Janet Yellen last week said the U.S. could withstand higher rates, and DoubleLine Capital’s Jeffrey Gundlach predicted Thursday that Treasury bulls will face more pain. While Labor Department figures Friday showed robust job growth in the U.S., the wage figures had some investors wondering if the Fed will put off a planned increase in interest rates.

The yield on the 10-year Treasury was 2.38% as of 12:41 p.m. in New York. That compares with about 2.14% two weeks earlier and a 2017 peak of more than 2.6% in March.

Krishna Memani, chief investment officer and head of fixed income at OppenheimerFunds Inc., agreed with Tipp that yields will probably hit 2% before 3%. He said too many investors are excessively concerned about the possibility of raising costs for labor or consumer goods. Some have been worrying since the financial crisis about inflation that still hasn’t arrived, he said.

‘Burden of Proof’

“Therefore the burden of proof really is on the people who look at the data 15 different ways and conclude that someday, somehow we will end up with inflation,” he said. “What the world wants more than anything else is a good bond. And I think that is the driver of yield more than anything else.”

But Oksana Aronov, an alternative fixed-income strategist at JPMorgan Chase & Co.’s asset-management unit, said on the same program that investors ignore messages from the Fed at their own peril. The central bank has lifted its benchmark rate twice this year and sent signals there will be another increase.

“The Fed is going to continue on this path, and I think there’s a lot of complacency,” considering that the central bank also plans to reduce its balance sheet, and trends in the oil market might limit demand for fixed-income holdings, she said. “All of those factors will continue to push bond yields higher, irrespective of what the inflation number is.”

PGIM is the $1 trillion asset manager at insurer Prudential Financial Inc. Memani’s business is part of rival Massachusetts Mutual Life Insurance Co.

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