Despite the Bank of Jamaica’s (BOJ’s) intervention to sell American dollars in the local money market, which removed Jamaica dollar (JMD) liquidity from the system, the money market remains moderately liquid.

As of last week, a total of J$44.12 billion was in circulation in the domestic market, as represented by the aggregated current balances for deposit-taking institutions (DTIs). The aggregated closing current account balance decreased by J$11.83 billion from J$32.35 billion in the prior week. 

Furthermore, the BOJ intervened once in the foreign exchange market to sell US$20 million, which took JMD supply from the market. Additional JMD liquidity was removed from the market following the BOJ’s 25-month 8.50 per cent US-Indexed Note. 

The average yield for this auction was 8.93 per cent and was oversubscribed with bids totalling J$29 billion relative to the offered size of J$14 billion with the highest bid for full allocation being 9.14 per cent. The note is set to mature on June 10, 2026. 

Demand for short-term JMD instruments remains high, as reflected in the increase in the bid-to-cover ratio for the most recent BOJ Certificate of Deposit (CD) auction of 1.59, a 63 basis point increase relative to 0.96 the prior week. Notably, bids received totalled J$55 billion relative to the offer size of J$34.5 billion. 

The average yield from the BOJ’s 30-day competitive price auction saw a decline further to 10.60 per cernt versus 11.02 per cent in the prior week.

The sustained fall in yield is likely due to the implementation of the reserve yield of 11.5 per cent as well as signals that the BOJ could reduce its policy rate later this year as inflation eased, falling within the BOJ’s target range for March. 

Consequently, the highest bid rate for full allocation was 10.9 per cent, which fell from 14.00 per cent in the prior week.