Durrant Pate/Contributor

There was a slight contraction of liquidity in Jamaica’s money market last week.

Data from the Bank of Jamaica (BOJ) shows that as May 11, a total of J$30.9 billion was in the market, as represented by the central bank’s aggregated current balances. The aggregated closing current account balance decreased by J$8.8 billion, up from J$39.8 billion week over week.

Broker demand for the Jamaican dollar remained low last week, particularly for short-term funds. Rates in the retail market have also stayed consistent.

GOJ to mop of liquidity by month-end

There are current expectations that the Government of Jamaica (GOJ) will tap the money market within the next two weeks based on its funding schedule for this fiscal year, which could cause the aggregate balance to fall further. Money market yields continued on a downward trend with the average yield from BOJ’s 30-day Certificate of Deposit (CD) competitive price auction falling for the eighth week to 7.97 per cent versus eight per cent in the prior week.

The auction was oversubscribed with bids received totalling J$27 billion relative to the offer size of J$20 billion implying a bid-to-cover ratio of 1.35 down from 1.45 in the prior week. The highest bid rate for full allocation was 8.149 per cent, unchanged from the prior week.

The BOJ’s 13-month CD auction on May 8 was also oversubscribed with bids received amounting to J$32.7 billion, relative to the offer size of J$22 billion (bid-to-cover ratio of 1.49). The average yield from the auction was 7.99 per cent with the highest bid rate for full allocation being 8.176 per cent.

Money market players say the average auction yield for both the 30-day and the 13-month CDs is representative of the direction in which interest rates are heading. Earlier this year, the 30-day CD yield was averaging above nine per cent with successful bids at 10 per cent and above.