Caribbean Bonds and Global Markets Face Higher Interest Rates

Caribbean Bonds face higher interest rates.

May 16, 2026

Dave Dookie, Managing Director

• Higher U.S. CPI shifted Fed expectations: Stronger inflation data reduced the likelihood of near-term Federal Reserve rate cuts, reinforcing a “higher-for-longer” interest rate environment and keeping upward pressure on global bond yields.

• Global equity markets weakened: U.S., UK, European and Asian markets broadly declined during the week as investors reassessed valuations amid higher interest rate expectations. Technology shares faced pressure while energy stocks outperformed due to elevated oil prices.

• Energy remained a bright spot: Brent crude stayed above US$100/bbl levels, supporting gains in oil majors such as Exxon and Chevron and helping energy-related sectors outperform broader markets.

• Trinidad & Tobago equities were mixed amid lower activity: Trading volume and market value declined significantly, while the Composite Index remained largely flat. AMBL, PLD and NCBFG were among the strongest performers.

• Local bond issuance conditions remain supportive but more selective: Excess liquidity declined to TT$3.33 billion from TT$3.77 billion but remain sufficient for upcoming bond issues. Investors may increasingly favor stronger credits and demand higher spreads as global yields remain elevated.

The stronger U.S. Consumer Price Index (CPI) print this week has materially reduced the probability of near-term Federal Reserve rate cuts. Headline inflation was reported near 3.8% year-on-year, while Cleveland Fed’s Center for Inflation Research points to continued price pressure into May, keeping policy expectations tilted toward “higher for longer”. For investors, the implication is that the Fed funds rate is likely to remain restrictive, supporting elevated Treasury yields, widening discount rates for equities, and keeping pressure on long-duration growth stocks.

This has direct consequences for capital markets. Higher U.S. rates increase the required return on risk assets, raise the cost of refinancing, and make short-term cash and Treasury bills more competitive. U.S. Treasury Bill and Notes closed the week with the 1-year Bills at 3.51%, 10-year Notes at 4.29%, and 30-year Bonds at 5.12%. The global risk-free curve remains an important anchor for Caribbean bond pricing.

U.S. equities weakened over the last five trading days, with the S&P 500 flat at around 0.17%, Nasdaq down 0.08%, and Dow Jones Industrial Average down 0.17%. The pressure was broad-based, with technology and semiconductor names softening as investors reassessed valuation multiples against higher yields. Apple gained modestly, but Alphabet, Broadcom, Micron and Meta were weaker. Energy, however, outperformed, helped by firmer crude and natural gas prices, with ExxonMobil and Chevron gaining over the period.

In the UK, the FTSE 100 declined 0.37% over the week. The move reflected weaker global risk sentiment, higher global bond yields, and pressure on cyclical sectors. However, UK energy exposure provided some support as Brent crude remained elevated around US$109 per barrel. Shell and BP advanced, highlighting the defensive role of integrated oil majors during periods of geopolitical and inflation uncertainty.

European equities also came under pressure. The Euro Stoxx 50 fell 1.42%, France’s CAC 40 declined 1.97%, Germany’s DAX lost 1.59%, and Italy’s FTSE MIB was down 0.35%. The decline reflected concern that higher energy prices could slow disinflation and delay monetary easing by the European Central Bank. European industrials and exporters were particularly vulnerable to rising input costs and weaker global demand expectations.

Asian markets were mixed but generally weaker. Japan’s Nikkei 225 declined 2.08%, Hong Kong’s Hang Seng fell 1.63%, and China’s Shanghai Composite slipped 1.07%. Higher U.S. yields and a stronger dollar remain headwinds for Asian capital flows, while China’s market continues to face concerns around uneven domestic demand. The Asia-Pacific index declined 2.09%, indicating broad regional pressure.

In Trinidad and Tobago, equity trading was subdued. The First Tier Market saw 672,224 shares traded, down 59.16% from the prior week, while traded value fell 77.78% to TT$5.66 million. The Composite Index closed almost flat at 979.45, the All T&T Index rose 0.07%, the Cross Listed Index declined 0.24%, and the SME Index fell 8.84%. AMBL led with gains with a 14.00% increase, followed by PLD at 7.36% and NCBFG at 6.67%.

The fixed income market remains the most important signal for local issuers. Commercial bank excess reserves fell to TT$3.33 billion from TT$3.77 billion, a decline of approximately TT$435 million. While liquidity remains meaningful, the weekly decline suggests some tightening in available cash balances. OMO and debt auction maturities totaled TT$800 million, with the next maturity scheduled for May 22, 2026.

For new bond issues expected in the coming weeks, the liquidity backdrop is still supportive, but we could expect new issues at higher interest rates. Stronger issuers with clear credit stories, attractive coupons, and shorter to intermediate maturities should continue to attract demand. However, investors are likely to require higher spreads for longer-tenor or lower-rated issues, particularly as U.S. Treasury yields remain elevated and domestic liquidity has moderated.

Across Caribbean USD bonds, Trinidad and Tobago continues to trade as a relatively defensive regional credit. T&T sovereign offer yields ranged from 3.77% on the 2026 bond to 6.38% on the 2036 bond, compared with Barbados 2035 at 6.62% and Jamaica 2045 at 6.16%. Corporate levels were wider, with Heritage Petroleum 2029 offered at 5.50%, TSTT 2029 at 7.59%, and NGC 2036 at 6.59%.

Overall, the week’s key message is that inflation risk has re-entered the market narrative. Higher CPI reduces the room for Fed easing in the United States, supports elevated yields, and raises the hurdle rate for equities and new bond issuance. For Trinidad and Tobago, liquidity remains sufficient for well-structured new issues, but pricing will need to reflect a more selective investor base and a higher global interest rate environment.

About the author: Dave Dookie is the Managing Director of Waterloo Capital Advisors Limited, a Trinidad and Tobago based financial advisory firm specializing in investment management, capital markets and structured finance. He has advised governments, financial institutions, and energy companies on debt issuance, project financing, and strategic capital raising across the Caribbean. He holds degrees and advanced qualifications from the London School of Economics and Political Science (LSE) and the University of London and has completed advanced training in data science through the MIT Applied Data Science Program.

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