Has the 2026 bond bear market reached a turning point?

The 2026 bond bear market may be nearing a turning point as central-bank credibility improves, energy prices ease and inflation pressures moderate.

• The Federal Reserve’s rate hike stabilised U.S. bond yields, while Chair Warsh’s post-meeting performance improved confidence after his previous appearance had raised concerns about policy credibility.
• Markets price another rate hike in the coming quarter and three more by this time next year, but the author expects a slower cadence and believes less tightening may ultimately be needed unless upcoming data surprise negatively.
• If crude prices move sideways, base effects should flatten within six months, bringing U.S. CPI toward 3% and then the high 2s; with core PCE below 2.5%, the author sees little need for substantially higher rates after Q1.
• Five-year Treasuries look attractive near 5% yields, but heavy government and corporate issuance argues against extending beyond intermediate maturities; European yields could stabilise as gas prices and short-dated euro yields retreat after a 50-basis-point sell-off.
• UK CPI reached 3.1% and could exceed 4% in Q1, although even a more-than-15% energy-cap increase might keep its peak below 5%; Japan’s BOJ raised rates to 1.25%, while dissenting members’ possible replacement by dovish nominees complicates the normalisation outlook.

Takeaway: The author favours intermediate U.S. and European duration, remains constructive on long-dated JGBs, and expects bond-market stabilisation, but warns that energy prices, debt issuance and central-bank policy changes could invalidate the view.