Sharp drop in Treasury bill rates

Interest rates on Government of Jamaica Treasury bills reached their lowest levels yet, in more than 50 years, with the March Treasury bill auction, resulting in the 42 basis point fall in the 182 days and 37.5 basis point decline in 91 days instrument.
The 91 day bills cleared at an average of 2.98 percent, down from 3.35 in February, the 182 days instrument ended at 3.17 percent, a fall from 3.593 percent from the average rate in February. The sharp fall comes against the background of negative inflation rate for the year to February. With no tax increase for 2018, the next few months could continue to see very low inflation. The current inflation data contradicts any notion that investors are getting negative interest on their funds currently.
Investors placed $2.54 billion in the auction of $600 million for the 91 days bill and $2.48 billion for the 182 days instrument for which $600 million was on offer.
The trend in the rates suggest there will be more decline ahead but the fall should be coming to an end soon.
The decline has implications for a wide array of developments in the wider economy and should herald a general fall in interest rates across the board over the coming months. Stocks, real estate investments will get a kick from the lower rates and the government is set to save billion in interest cost while the rate charge to the heavily indebted Cable and Wireless on the intercompany debt is set to fall sharply to under 6 percent when the rate is reset in May, resulting in billion dollar savings.

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