“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.”
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.