In Q1 2025, bond markets delivered mixed but generally positive returns across major global and regional segments. 

Local government bond yields reflected a nuanced landscape as of February 2025. The 1-year GORTT yield increased by a notable 31 basis points, while changes across the curve were varied: marginal yield increases in the half-year (6 bps), 20-year (2 bps) and 30-year (5 bps) maturities were offset by declines in the 5-year (-9 bps) and 10-year (-3 bps) tenors. 

More telling, however, is the year-over-year movement: the 1-year GORTT yield rose by 222 basis points between February 2024 and February 2025—a sharp increase by any standard. Although official March figures from the Central Bank of Trinidad and Tobago (CBTT) are still pending, early 2025 data suggests upward pressure on local yields persists.  

Our team previously noted two key factors that may be contributing to these rising yields: 

1. Competition from higher global interest rates, which demand more attractive returns to retain capital locally; and 

1. Elevated perceived fiscal risk, with market participants potentially requiring a higher premium to lend to the government. 

That said, the situation remains fluid. The recent political transition in Trinidad & Tobago (T&T) brings with it the potential for fiscal recalibrations, as the newly elected administration begins to implement its mandate. While this may introduce some short-term uncertainty in the market, it also presents an opportunity for fresh policy direction and renewed investor confidence. 

As local rates have moved and the Federal Reserve continues to adopt a wait-and-see stance before changing policy, the gap between U.S. Treasury and GORTT yields has narrowed considerably. In February 2024, the 1-year UST rate was around 3% higher than its T&T counterpart. By February 2025, that margin had reduced to just 0.22%. While Trinidad’s 5-year bond yield rose slightly relative to UST, the 10-year yield declined, highlighting nuanced shifts in both countries’ yield curve dynamics. 

It’s also important to acknowledge that the drivers of bond yields in T&T are less transparent than in developed markets. The local market is relatively illiquid, and a small number of institutional players exert outsized influence. This means that investor sentiment and auction dynamics often move yields just as much as macroeconomic fundamentals. 

Making confident forward-looking projections is especially difficult currently due to: 

• Volatile global interest rate dynamics 

• Ongoing regional trade developments, and 

• Potential domestic fiscal policy redirection. 

These factors collectively introduce both upside and downside risks to the local interest rate environment. 

Across the Caribbean, bond market movements reflect a diverse mix of fiscal strategies, investor sentiment, and monetary policy approaches. While U.S. Treasuries remain the global benchmark for risk-free returns—used widely to price both sovereign and corporate debt—Caribbean yields respond to different local realities. 

For regional investors, it’s crucial to recognise that U.S. Treasuries are only risk-free in credit terms. They still carry currency risk, and practical considerations like liquidity, access, and tax treatment can affect how “risk-free” they are in the real world. This makes understanding the dynamics within Caribbean bond markets essential when constructing portfolios that balance safety, accessibility, and return. 

Barbados 

Barbados’ Treasury bill rates have held steady at 2.00% for the past five years. This reflects a relatively cautious fiscal approach and limited short-term borrowing requirements. 

Jamaica 

Jamaica has seen one of the region’s more dynamic rate environments. Treasury bill rates have fallen from 8.03% in March 2024 to 5.75% in March 2025, signalling improved fiscal credibility and growing investor confidence—although rates remain well above pre-pandemic levels of just over 2.00%. 

Bahamas 

In the Bahamas, Treasury bill auctions remain a consistent tool for managing short-term government funding. As of April 2025, the 91-day and 182-day bills were both yielding approximately 2.45%, reflecting a stable interest rate environment and moderate borrowing needs. 

Eastern Caribbean Currency Union 

The ECCU, comprising eight member states, maintains an active presence in the regional government securities market. Recent Treasury bill auctions have yielded competitive rates: 

• Dominica: In April 2025, the government issued 91-day Treasury bills amounting to EC$20 million at a yield of 2.00% 

• Saint Vincent and the Grenadines: A March 2025 auction saw 91-day Treasury bills totalling EC$28 million with a yield of 2.00% 

• Antigua and Barbuda: In March 2025, the government issued 365-day Treasury bills worth EC$15 million, achieving a yield of 3.00% 

The U.S. Federal Reserve is widely expected to cut interest rates in 2025. However, it has so far taken a wait-and-see approach, reflecting a complex landscape. Capital outflows from U.S. fixed income markets—driven by investor unease over aggressive trade rhetoric and tariff threats—have shifted flows into European and other markets. While several central banks have begun cutting rates amid slowing growth projections, the Fed remains cautious as it watches for the full effects of escalating trade tensions involving China, Europe, Canada, and Mexico. The risk of a prolonged trade war continues to cast a shadow over global trade, investor sentiment, and economic momentum. 

Even so, global bond markets delivered broadly positive results in the first quarter. The Bloomberg Core U.S. Aggregate Bond Index (AGG), which tracks a wide cross-section of investment-grade fixed income, ended the quarter up 2.74%. Corporate bonds performed well too, with the iBoxx Investment Grade Corporate Bond Index (LQD) posting a 2.49% gain—reflecting steady investor appetite for quality credit. 

High-yield bonds, which were among 2024’s standout performers, slowed to a 1.23% return as investors grew more cautious. Floating-rate bonds followed a similar trend, delivering a modest return of 1.11%, while convertible bonds declined by –1.32%, largely influenced by movements in equity markets. 

Emerging market debt was a relative bright spot. The JP Morgan Emerging Market Bond Index (EMB) returned 2.67%, and the local-currency counterpart, EMLC, stood out as a top performer with a 4.28% gain—benefitting from both stabilising monetary policy in key markets and investor rotation into diversified yield sources. 

Meanwhile, international developed market bonds also posted strong results. The iShares International Treasury Bond ETF (IGOV), composed primarily of European sovereign bonds, ended the quarter up 2.60%, echoing the positive sentiment seen across eurozone equity markets. 

Taken together, these developments highlight the evolving nature of the global fixed-income landscape. Opportunities remain across geographies, maturities, and credit segments—but investors must stay alert to the risks posed by uneven growth, inflation uncertainty, and policy shifts – especially trade-related – that continue to ripple through global markets. 

At Firstline, we’ve honed our expertise in global bond markets, enabling us to uncover ways for investors to participate in diverse fixed-income opportunities. Whether you’re looking for stable returns or exposure to growth-oriented bonds, our team is ready to guide you through the options. 

Inflation remains relatively contained in most major economies as of March 2025, with notable exceptions. The chart above shows Trinidad & Tobago at 0.7%, Barbados at 0.4%, and the USA at 3.0%. Interestingly, China and Panama are both experiencing deflation (–0.7% and –0.18%, respectively), a sign of slack domestic demand and slowing producer activity. On the higher end, Jamaica (4.7%), India (4.31%), and Japan (4.0%) continue to grapple with above-target inflation, albeit within manageable ranges. 

Despite these relatively modest inflation levels, underlying risks remain. Trade policy tensions—particularly U.S. tariffs aimed at China and the EU—could introduce new cost pressures. In the Caribbean and parts of Latin America, this could filter in indirectly through trans-shipment routes. While many Chinese goods enter the region via Panama (less likely to be affected), European goods are more often trans-shipped through Florida, making them potentially more vulnerable to rising import costs. For local businesses and consumers, this could show up in higher prices for everything from machinery to building materials. 

There’s also the risk of “profit-led inflation”—a scenario where firms use cost pressures as an opportunity to widen profit margins. While this has been more prominent in larger economies, it’s something Caribbean importers and retailers may be tempted to mirror, especially in niche or low-competition markets. The extent of this will likely vary across sectors. 

Looking at central bank policy, the story is more nuanced. Although headline rates remain steady—for instance, T&T at 3.50%, Jamaica at 6.00%, and the Dominican Republic at 5.75%—actual borrowing costs are creeping up. Anecdotally and through institutional feedback, businesses are facing higher rates on commercial loans, and consumers are seeing mortgage and vehicle loan rates edge higher, even as official benchmarks stand still. This suggests growing caution among lenders and a widening gap between policy intent and real-world conditions. 

Globally, central banks may begin lowering rates if growth falters, but few are rushing to do so. With the U.S. Fed at 4.50%, the UK and India also holding firm, and many Caribbean economies already managing elevated borrowing costs, there’s a delicate balance between supporting growth and keeping inflation expectations anchored. 

These trends affect both the cost of borrowing and the attractiveness of fixed-income investments. If policy rates begin to decline later this year, bonds issued now—with higher coupons—could see their value rise. For Caribbean investors, this could be a strategic moment to secure long-term yield before any shift in global monetary policy. 

At the same time, rising prices—whether due to tariffs, supply chain rerouting, or corporate pricing power—mean that inflation hedging and diversification remain critical. Understanding which regions are at risk of cost pass-throughs or monetary tightening helps investors stay ahead of curve-driven shocks. 

At Firstline, our team is constantly monitoring these shifts. Whether you’re reviewing fixed-income allocations, planning a borrowing strategy, or simply looking to preserve purchasing power, we’re here to help you make informed decisions in an increasingly complex rate environment.