With rate cuts looking like they are coming to the end of the cycle, Pendal's head of government bond strategies Tim Hext provides his insights on the outlook for 2026.

"It is an unclear picture, but definitely the global rate cutting cycle - which was a feature of late 2024 and most of this year - is now over," explains Tim.

He says rate cuts in Australia are highly unlikely at least for the next six to nine months based on the latest inflation data.

However, Tim is optimistic that inflation will not hit a level that is unsettling for the bond market.

"If you think back to last decade, we had inflation consistently slightly undershooting to 2% at the bottom of the RBA band, and we're going to see inflation consistently shooting above 3% for the first half of next year, but not at a level which will make things unsettled," he says.

How does this rate uncertainty shape portfolio construction? Tim explains in this podcast.

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Find out more about Pendal's fixed income strategies at pend.al/fixedinterest

Pendal is a global asset manager. Find out more at pendalgroup.com

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