JAM | May 6, 2023

Jamaican money market buoyed by increased liquidity last week

/ Our Today

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The Bank of Jamaica in downtown Kingston. (Photo: JIS)

Durrant Pate/Contributor

Jamaica’s money market operations last week exhibited increase liquidity with a total of J$57.7 billion, as represented by the Bank of Jamaica’s (BOJ’s) aggregated current balances.

This is up by J$26.3 billion from the J$31.30 recorded for the previous week. The aggregated balance also increased by J$26.80 billion from the J$30.87 billion posted on December 30.

This signaled a notable increase in market liquidity. Consequently, last week’s broker demand for the Jamaican dollar remained low, particularly for short-term funds and rates were stable.

In line with the improvement in liquidity and cooling of interest rates, yields on primary BOJ Certificates of Deposit and the government bond offer fell. The average yield from BOJ’s competitive price auction decreased for the sixth consecutive week to 8.11 per cent versus 8.32 per cent in the prior week.

BOJ money market auction oversubscribed

The auction was oversubscribed as, bids received totaled J$46.4 billion relative to the offer size of J$32 billion. NCB Capital Markets, one of the biggest players in Jamaica’s money market, said “over-subscription will likely continue, as investors aim to take advantage of elevated rates before interest rates begin to decline due to falling inflation.”

(Photo: Facebook @NCBCapitalMarkets)

The highest bid rate for full allocation was 8.25 per cent, compared to 8.35 per cent in the prior week. The Government of Jamaica also entered the market last week by reopening the GOJ 10.00 per cent 2028 FR Benchmark Investment Notes with offer volume of J$9 billion.

The auction was significantly oversubscribed with a bid-to-cover ratio of 3.9x. The reserve yield was 9.5 per cent with the highest bid that was fully allocated coming in at 9.089 per cent.

This is relative to a reserve yield of 10 per cent and highest yield for full allocation of 10 per cent when this instrument was issued in March 2023.


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