Summer of Bonds: Inflation Peaked, Rates Peaked (with Lisa Abramowicz, Annmarie Hordern)

George Goncalves argues inflation has peaked, driven largely by oil shocks, and that rates have likely seen their highs for 2026. He expects a bond rally, a removal of the easing bias, and a potential window for rate cuts by year-end. He is skeptical of a second wave of higher oil prices and believes the labor market is not as strong as perceived.

Yields cautious down , medium term, interviewee explicit

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George Goncalves 7.5

Summer of Bonds: Inflation Peaked, Rates Peaked (with Lisa Abramowicz, Annmarie Hordern)

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He is skeptical of a second wave of higher oil prices and believes oil prices have remained contained, implying a bearish or stable outlook.

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We are entering a summer of the bond market. We have probably seen the high prints for rates.

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4/29/2026 8:52:28 PM	medium term up	20 days later	+4.15%	+4.15%
2/20/2026 7:02:30 PM	medium term cautious down	21 days later	+4.74%	-2.37%
12/11/2025 1:47:48 PM	medium term cautious down	21 days later	-0.17%	+0.08%

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George Goncalves

We are entering a summer of the bond market. We have probably seen the high prints for rates. Oil prices have remained contained despite the conflict, and we don't buy the idea of a second wave of higher oil prices. Inflation has largely come from the oil shock, and there is not a real inflation problem elsewhere.
Lisa Abramowicz

Do you think Kevin Warsh can truly unleash the summer of bonds given he is squaring off against credibility and the overhang from the White House?
George Goncalves

Everyone has to temper their enthusiasm. We need to see what happens with the MOU. I think this will be a gradual toe-in to changes at the Fed. If inflation has truly peaked, and oil and rates have peaked, then you can open a window to cut rates at the end of the year.
Annmarie Hordern

But they are not going to get back to the 2% target this year. What is the catalyst for confidence given many committee members are concerned about inflation and the labor market?
George Goncalves

Depending on how you look at the data, you can get down towards mid-2s by the end of the year and into the 2s by 2027. The Fed has eased the last two years with inflation well above target. The key is the understanding of neutral. They will likely remove the one potential cut from the dot plot.
Lisa Abramowicz

Given the market tear and new billionaires from SpaceX, how does that factor into the Fed's assessment of current conditions?
George Goncalves

The going is great when it's going. The question is how it looks at the end of the year. We've had euphoric moves that peter out. If momentum continues and stocks make new highs, that builds financial conditions easing, which takes pressure off the Fed to ease.

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