The Gov­ern­ment of the Re­pub­lic of Trinidad and To­ba­go (GORTT) has ap­point­ed JP Mor­gan Se­cu­ri­ties and Bank of Amer­i­ca Se­cu­ri­ties to arrange a US$1 bil­lion in­ter­na­tion­al bond is­sue. The trans­ac­tion, au­tho­rised by the Min­is­ter of Fi­nance un­der the Ex­ter­nal Loans Act on Jan­u­ary 12, 2026, tar­gets qual­i­fied in­sti­tu­tion­al buy­ers in the Unit­ed States un­der Rule 144A and in­ter­na­tion­al in­vestors un­der Reg­u­la­tion S.

All of this was an­nounced over the past week. We should note that there is a US$1 bil­lion bond com­ing due in Au­gust 2026. While not ex­plic­it­ly part of the an­nounce­ments, it seems straight­for­ward that the cur­rent en­gage­ment is to re­fi­nance the bond due in eight months time.

From all ac­counts, this bond is what is re­ferred to as a “bul­let at ma­tu­ri­ty” which means on­ly in­ter­est is paid over the ten years that the bond was in is­sue (from 2016) and the prin­ci­pal is due in Au­gust 2026. The GORTT ei­ther needs to re­fi­nance or draw down on the stock of US dol­lar re­serves at the Cen­tral Bank or in the Her­itage and Sta­bil­i­sa­tion Fund. Re­fi­nanc­ing is the more prac­ti­cal op­tion.

Once we un­der­stand why this new bond is nec­es­sary, the next ques­tion is what yield will T&T need to of­fer to clear this trans­ac­tion? The an­swer re­quires ex­am­in­ing the coun­try’s bor­row­ing his­to­ry, cur­rent mar­ket con­di­tions, and the un­com­fort­able re­al­i­ty that both ma­jor cred­it rat­ing agen­cies now view our fis­cal tra­jec­to­ry with con­cern.

Trinidad and To­ba­go cur­rent­ly has five USD sov­er­eign bonds out­stand­ing, to­talling ap­prox­i­mate­ly US$2.96 bil­lion. The evo­lu­tion of coupons (in­ter­est rates) on these in­stru­ments tells the sto­ry of our chang­ing cred­it­wor­thi­ness and the shift­ing land­scape of glob­al in­ter­est rates.

In May 2007, dur­ing the en­er­gy boom, we is­sued US$150 mil­lion at 5.875 per cent for twen­ty years. The US 20-year Trea­sury yield­ed 4.99 per cent at the time, mean­ing in­vestors de­mand­ed bare­ly 90 ba­sis points above the risk-free rate (the US Trea­sury). S&P rat­ed us A-mi­nus with a pos­i­tive out­look. We were, in cred­it mar­ket par­lance, a sol­id in­vest­ment grade sov­er­eign with sub­stan­tial fis­cal buffers and min­i­mal ex­ter­nal debt.

By Au­gust 2016, the pic­ture had changed dra­mat­i­cal­ly. This is the bond that is ma­tur­ing now. At the time oil prices had col­lapsed, the econ­o­my was in re­ces­sion, and both rat­ing agen­cies, S&P and Moodys, had down­grad­ed us. Yet we raised US$1 bil­lion at 4.50 per cent, a low­er coupon than 2007. How?

The US 10-year Trea­sury had fall­en to just 1.51 per cent amid glob­al mon­e­tary eas­ing fol­low­ing years of post cri­sis stim­u­lus. Our spread, how­ev­er, had bal­looned to ap­prox­i­mate­ly 299 ba­sis points. In­vestors were will­ing to lend, but they want­ed con­sid­er­ably more com­pen­sa­tion for T&T risk, even though the over­all in­ter­est rate to us was low­er.

June 2020 pre­sent­ed an even more chal­leng­ing is­suance en­vi­ron­ment. COVID-19 had frozen cap­i­tal mar­kets; the Fed had slashed rates to near ze­ro; and T&T sat at the edge of in­vest­ment grade, with S&P at BBB-mi­nus and Moody’s al­ready in junk ter­ri­to­ry at Ba1. We is­sued US$500 mil­lion at the same 4.50 per cent coupon as 2016, but the un­der­ly­ing math was dif­fer­ent: the 10-year Trea­sury yield­ed just 0.64 per cent, im­ply­ing a spread of 386 ba­sis points. This is the widest we had to pay in this analy­sis and shows that as the coun­try’s for­tunes de­clined, the cost of bor­row­ing has gone up.

The 2023 and 2024 is­suances re­flect­ed a nor­mal­is­ing spread en­vi­ron­ment. In Sep­tem­ber 2023, we raised US$560 mil­lion at 5.95 per cent with the 7-year Trea­sury at 4.38 per cent. This was a spread of rough­ly 157 ba­sis points. By June 2024, US$750 mil­lion came at 6.40 per cent against a 10-year Trea­sury of 4.32 per cent, im­ply­ing a spread of ap­prox­i­mate­ly 208 ba­sis points. The coupon rose be­cause US rates had risen sub­stan­tial­ly dur­ing the Fed­er­al Re­serve’s ag­gres­sive tight­en­ing cy­cle, but our coun­try spe­cif­ic risk pre­mi­um had ac­tu­al­ly nar­rowed from pan­dem­ic lev­els. That nar­row­ing re­flect­ed sta­bil­is­ing en­er­gy rev­enues and the Gov­ern­ment’s demon­strat­ed abil­i­ty to ser­vice its oblig­a­tions with­out dis­tress.

To­day

As of mid Jan­u­ary 2026, the US 10-year Trea­sury yields ap­prox­i­mate­ly 4.17 per cent. The Fed­er­al Re­serve, hav­ing cut rates three times in late 2025, now holds the fed funds tar­get at 3.50 to 3.75 per cent. They are al­so be­ing pres­sured by the Trump Ad­min­is­tra­tion to low­er in­ter­est rates fur­ther. The US Fed has less con­trol over long-term rates, and this has proven stub­born, re­flect­ing mar­ket con­cerns about US fis­cal deficits and in­fla­tion ex­pec­ta­tions that re­main above the Fed’s 2.0 per cent tar­get.

T&T’s ex­ist­ing bonds pro­vide the clear­est guide to what in­vestors cur­rent­ly de­mand. The 2034 bond, is­sued at 6.40 per cent, now trades rough­ly around 6.25 per cent. This im­plies in­vestors are com­fort­able with a spread of rough­ly 208 ba­sis points at the long end of our curve. The 2030 and 2031 bonds trade around 5.5 per cent, while the 2026 bond ma­tur­ing in Au­gust, trades at around 5.90 per cent, re­flect­ing its short re­main­ing life and the cer­tain­ty of im­mi­nent re­pay­ment.

The above rates are not quot­ed from a trad­ing screen and are in­dica­tive. They should not be tak­en as in­vest­ment ad­vice. The pur­pose here is to demon­strate in a prac­ti­cal man­ner how the new is­sue can pos­si­bly be priced and of­fers no in­di­ca­tion that this is how it will pan out.

The crit­i­cal dis­cus­sion point is what has changed since June 2024. Both rat­ing agen­cies have re­vised their out­looks to neg­a­tive, a key con­sid­er­a­tion for this is­sue.

A new 10-year bond would like­ly have to clear at or above where the ex­ist­ing 2034 bond trades. With the 2034 yield­ing around 6.25 per cent, any new 10-year must of­fer a pre­mi­um to com­pen­sate for the ad­di­tion­al tenor (two ex­tra years to a 2036 ma­tu­ri­ty), the larg­er is­sue size (US$1 bil­lion ver­sus US$750 mil­lion), and the stan­dard new is­sue con­ces­sion that in­vestors de­mand for tak­ing on fresh pa­per rather than es­tab­lished se­cu­ri­ties with known trad­ing pat­terns.

A rea­son­able es­ti­mate places the spread for this trans­ac­tion at 220 to 260 ba­sis points over the 10-year Trea­sury. With the bench­mark at ap­prox­i­mate­ly 4.17 per cent, this sug­gests an all-in yield of 6.4 to 6.8 per cent.

This is not an alarm­ing out­come. It is, how­ev­er, mean­ing­ful­ly high­er than or past ex­pe­ri­ence. The neg­a­tive out­looks from both agen­cies sig­nal that in­vestors will price in some prob­a­bil­i­ty of fu­ture down­grades, even if T&T’s fun­da­men­tal cred­it strength­ens. The pos­i­tives are that the HSF, man­age­able debt lev­els rel­a­tive to re­gion­al peers, and an un­blem­ished record of meet­ing ex­ter­nal oblig­a­tions re­main in­tact.

Bot­tom line

The re­fi­nanc­ing is nec­es­sary. The 2026 bond must be re­paid, and do­ing so from do­mes­tic re­sources alone would strain liq­uid­i­ty and crowd out oth­er fis­cal pri­or­i­ties. In­ter­na­tion­al mar­ket ac­cess, demon­strat­ed re­peat­ed­ly since 2007, re­mains T&T’s com­par­a­tive ad­van­tage among Caribbean sov­er­eigns.

But the terms of ac­cess have changed. We are no longer bor­row­ing against the back­drop of in­vest­ment grade rat­ings from mul­ti­ple agen­cies with sta­ble out­looks. We are bor­row­ing with one agency at the low­est rung of in­vest­ment grade and an­oth­er in spec­u­la­tive ter­ri­to­ry, both with neg­a­tive out­looks. Every ba­sis point mat­ters: on a US$1 bil­lion is­sue, 50 ba­sis points costs an ad­di­tion­al US$5 mil­lion an­nu­al­ly in in­ter­est ex­pense over the life of the bond.

The Min­is­ter’s de­ci­sion to ex­empt these notes from lo­cal tax­es and ex­change con­trols is stan­dard prac­tice for in­ter­na­tion­al sov­er­eign debt. It en­sures the bonds trade clean­ly in glob­al mar­kets and re­moves any fric­tion that might de­ter in­sti­tu­tion­al par­tic­i­pa­tion. More con­se­quen­tial is how in­vestors per­ceive T&T’s fis­cal tra­jec­to­ry over the bond’s ten-year life. S&P has ex­plic­it­ly warned that rat­ings could be low­ered with­in six to twen­ty-four months ab­sent mean­ing­ful steps to strength­en pub­lic fi­nances, boost non-en­er­gy growth and main­tain ex­ter­nal buffers.

Emerg­ing mar­ket debt has at­tract­ed sig­nif­i­cant in­flows re­cent­ly as in­vestors seek yield in a mod­er­at­ing rate en­vi­ron­ment. If ap­petite is ro­bust, we may price to­ward the low­er end of the es­ti­mat­ed range. If mar­kets turn risk averse or geopo­lit­i­cal con­cerns flare, we could see yields push high­er.

It is like­ly that we will pay more than we did in June 2024. The mar­ket has spo­ken through the sec­ondary trad­ing of our ex­ist­ing bonds and through the rat­ing agency ac­tions. T&T re­mains cred­it­wor­thy, but cred­it­wor­thi­ness is not bi­na­ry, it is priced on a con­tin­u­um. The pre­mi­um we pay to­day re­flects ac­cu­mu­lat­ed years of fis­cal slip­page, en­er­gy sec­tor de­cline and for­eign ex­change pres­sure that suc­ces­sive gov­ern­ments have ac­knowl­edged but not de­ci­sive­ly ad­dressed.

Ian Nar­ine is a fi­nan­cial con­sul­tant ob­serv­ing the fi­nan­cial road­show at at time when every­one else hits the road for show. Please send your com­ments to ian@ian­nar­ine.com