No BOJ FX intervention during the week to absorb JMD dollars

Durrant Pate/Contributor

There was an excess amount of liquidity in Jamaica’s money market last week with a total of J$29.1 billion in the system, as represented by the Bank of Jamaica (BOJ) aggregated current balances. 

The aggregated closing current account balance increased by J$11.2 billion, up from J$17.9 billion week over week, as there was no BOJ foreign exchange intervention during the week to absorb the Jamaican dollar liquidity, while the BOJ auction in the market brought out additional liquidity.

For the first time in 10 weeks, the average yield from the BOJ’s competitive price auction increased to 8.24% versus 7.96% in the prior week. The auction was oversubscribed with bids received amounting to J$35.1 billion relative to the offer size of J$35 billion, indicating a bid-cover ratio of 1.0028. 

Highest bid rate for full allocation 

The highest bid rate for full allocation was 10.50%, which is an increase from 8.049% in the prior week. The next auction date for the BOJ 30 days Certificate of Deposit will be held tomorrow May 31.

The low bid-cover ratio was likely influenced by the diversion of funds to the GOJ 9.625% 2031 auction, which was oversubscribed with bids received totalling J$11.9 billion, for an offer size of J$2 billion. Investors likely chose to lock in the higher rate for the longer maturity instrument, given expectations for interest rates to fall as inflation stabilizes at a lower rate. 

The average yield from the auction was 8.355 % with the highest bid rate for full allocation being 8.40%. The GOJ 10.00% 2028 auction was also oversubscribed.

Bids received totalled J$19.4 billion relative to an offer size of J$6 billion. The average yield from the auction was 8.56% with the highest bid rate for full allocation being 8.745%.