Inflation’s Shadow Over Australian Bonds: Fixed Income Strategies for 2026

By John Baxter, Fixed Income Advisor at LWP Capital

Persistent inflation in January 2026 is reshaping Australian bonds, with yields reflecting RBA concerns. As John Baxter at LWP Capital, I provide insights for navigating this.

Market Overview: Inflation Data and Bond Reactions

Q4 2025 data showed 3.4% underlying inflation, lifting 10-year yields to 4.7%. Treasury Indexed Bonds (TIBs) yielded 2.0% real.

John Baxter from LWP Capital sees TIB issuances at AUD 1.5 billion.

Expert Analysis: Inflation Dynamics

Wage growth at 3.4% fuels pressures. “Bonds face duration risks, but real yields offer protection,” notes John Baxter at LWP Capital.

Investment Strategies: Inflation Hedges

Allocate to TIBs and floating-rate bonds. John Baxter advises, “20% in indexed bonds for real return security.”

Outlook: Toward Target Convergence

Inflation may ease to 2.7% by year-end. John Baxter at LWP Capital says, “Opportunities abound for prepared investors.” Reach LWP Capital.