Rates paid on Bank of Jamaica 30 days CDs dropped for a second week at the latest auction on Wednesday this week, to 8.49 percent from 8.85 percent on March 22.
The rate declined from 10.54 percent at the auction on March 17 after BOJ offered $18 billion, which attracted $57.86 billion on March 22. At this week’s auction, $35 billion was offered by the central bank and attracted $70 billion, resulting in the highest successful rate at 8.85 percent and the lowest at 7.5 percent, down from 8.2 percent the week before. BOJ absorbed $88.85 billion at the end of the CD auction, up from $81.85 billion the previous week but still down sharply from a peak at $109.5 on March 1.
The move brings the CD rates in line with Treasury bills, with an average rate for 90 days coming in at 8.21 percent on March 8.
BOJ CD rate drop for a second week
BOJ now paying over 4% on CDs
Interest rates rose to 4.17 percent in the latest Bank of Jamaica 30 day CD offering of 12 billion on Wednesday last week, up from 3.28 percent on Wednesday, October 6 and well over the new overnight rate of 1.5 percent.
Having settled at a low of just over 0.5 percent for the past two years, the latest rate marks a significant shift in a very short time frame, a development that investors should watch carefully.
At the recent auction, the central bank received 53 bids amounting to $14 billion for $12 billion on offer, 46 bids were successful up to 5.27 percent and came after BOJ increased their overnight rate to 1.5 percent. The total nominal outstanding amount for the 30-day CDs $46.5 billion, similar to the week before, but well above the $35.5 billion at the end of July.
At the same time, the Government of Jamaica Treasury bill auction on Wednesday, October 10, rates on the three tenors on offer ended with an average rate of 2.165 percent for the 90 day offer that attracted $2.246 billion for the $700 million on offer. The 181 days offer saw $1.974 billion chasing the $700 million offered and resulted in an average rate of 2.75 percent and the 273 days T-bill pulled in $1.865 billion for $800 million offered and resulted in an average rate of 3.69 percent.
The range for yields for full allotment is 1.45 percent to 2.85 percent for the 91 day T-Bill, 1.5 percent to 3.05 percent or the 182 days T-bill and 2.41 percent to 4.75 percent for the longest dated bill.
On Thursday, October 21, the central bank will auction $4.5 billion 365 days Certificate of deposit.
Interest rates rise sharply in March
Government of Jamaica Treasury bill (T-bill) rates reached their highest level since August last year when the average rate for the half-year instrument touched 2.01 percent and the three months hit 1.87 percent.
At the March auction, for T-bill, rates moved up from 1.337 percent in February to 1.85 percent in March for the shorter-term treasury rate and from 1.387 percent for the 192 days to 1.796 percent. The rates are coming from a low of 1.252 percent and 1.453 percent, respectively in January this year.
In January, $3.12 billion chased after the $700 million offer for the 91 days offer, in March the demand dropped sharply to just $1.05 billion, for the half T-bills, the amounts applied for fell from $2.32 billion to $1.41 billion.
On February 7, Bank of Jamaica (BOJ) 30 days CD rates averaged just 1.17 percent as $15.64 billion chased after $10 billion offered by the country’s central bank. In the March 16 auction, the average rate jumped to 3.51 percent, with the highest being 4.5 percent for $100 million as investors placed just $7.66 billion for the $8 billion BOJ offered. BOJ also offered CDS on March 11, amounting to $10 billion, with $14.15 billion going after it at an average yield of 2.78 percent.
The rise in interest rates occurs at a time of falling liquidity and the largest intake of taxes for the financial year by the government. Historically, March is the month with the highest fiscal surplus for the year as the intake of taxes is the highest. The result of the increased inflow of taxes drains liquidity from the system. This year, the situation is worsened by the $25 billion initially drained from the financial market by the Initial public offer of Trans Jamaica Highway. With the government planning to pay $73 billion to reduce the public sector debt, investors can look forward to increased liquidity before too long.
Treasury bill rate almost steady at 1.71%
Interest rates essentially remained stable based on the latest Treasury bill auction that took place at Bank of Jamaica. The moved but was just modestly higher with a few basis points increase.
Applications were opened on Wednesday, at the Bank of Jamaica for $700 million Government of Jamaica Treasury Bills dated Friday, September 14, with maturity on Friday, December 14, 2018 for a 91 days duration. The Average Yield came out at 1.7093 percent with partial allotment at 2 percent. The offer attracted bids of $932,026,500. The latest T-bill rate comes against the back ground on the central holding their overnight policy rate at 2 percent.
At the auction in August, the 91 days Treasury bill cleared at an average of 1.694 percent with partial allotment at 1.756 percent. At that auction $1.863 billion chased after the $700,000 on offer. The 182 days instrument ended with an average rate of 1.878 percent with $2.53 billion going after the $700,000 in August.
Investors push interest rate to 1.74%
Liquidity remains high, in the Jamaican financial market with investors driving the average to 1.74 percent on Bank of Jamaica (BOJ) 30 days certificate of deposit earlier this week, as demand of $24 billion chased $8.5 billion on offer.
In mid -July, more than $50 billion in government bonds expired with interest, but government took up less than $15 billion in new bonds, as it paid back the bonds in cash, using a large draw down from funds held at Bank of Jamaica by Public sector entities, amounting to $50 billion.
At the end of June, Public sector entities deposit at BOJ was $97 billion but fell to $46 billion after the payout of the bond. The payout added to the high level of liquidity in the market that helped drive interest rates down to 2 percent at the mid-July Treasury bill Auction.
On Tuesday, July 31, applications were received by BOJ for $8.5 billion BOJ 3 percent Certificate of deposit through a competitive price auction. The issue attracted 61 bids amounting to $24 billion, only 41 bids were successful, with the average yield of 1.74 percent. The lowest submitted rate was 1.39999 percent for $40 million and the highest was 6 percent for $40 million. The highest rate for full allocation was 1.83 percent in the amount of $100 million.
The average rate is below BOJ’s overnight rate of 2 percent and the last 91 days Treasury bill rate of 1.95963 percent.
Treasury bill rates plunged
Treasury bill rates plunged at the latest auction to raise $1.4 billion for Government of Jamaica held today.
At the latest Treasury bill auction the rate on the 91 days bill declined by just over 58 basis points to just 1.9596 from to 2.544 percent at the June auction, while the 182 days instrument average rate dipped 65 basis points to 2.07 percent from 2.656 percent from the June Auction. The two offerings of $700 million each attracted a total of just over $6.2 billion up from $5.3 billion in June, an indication of continued high liquidity in the market. The latest fall in rate follows a recent 50 basis point drop in Bank of Jamaica’s (BOJ) overnight rate to 2 percent and is almost certain to trigger another cut in the BOJ overnight rate.
The continued fall in rates comes against the back ground of negative inflation of 0.3 percent for the first half of the year. The sharp fall in rates is bound to be reflected in increased demand for stocks and real estate going forward as investors seek higher returns on their investments. Technical indicators point to a big break out for local stocks starting in August and the recent fall in rates will be a critical fuel for it.
More fall in Treasury bill rates
Government of Jamaica Treasury bill sample
At the latest Treasury bill auction, the average rate on the 91 days bill declined to 2.544 percent from 2.71 percent at the May auction, while the 182 days instrument average rate dipped to an average of 2.656 percent from 2.83 percent for May. The two offerings of $700 million each, attracted a total of just over $5.3 billion, an indication of continued high liquidity in the market.
The continued fall in rates comes against the back ground of negative inflation of 0.6 percent up to April, including deflation of 0.40 percent in April.
Stocks shrug off interest rate rise
The latest issue of Treasury bill offerings saw the 182 instrument climbing 40 basis points to 6.2 percent while the 91 days T-bill rose marginally to virtually hold at 5.70 percent just a tad above the average in October.
The 28 day T-bill slipped from 5.78 percent to 5.70 percent. At the same time the main market All Jamaica Composite index continues to climb with some companies posting good increased profits.
The rise in the 192 days instrument comes against the back drop of stability in the exchange rate for November to date, very low inflation that seems headed to around than 2 percent for 2016. The change in rates also comes against the change in Bank of Jamaica policy to offer Certificate of Deposits daily to the market to bid on.
Interest rates drop
Interest rates payable on the latest round of Treasury bill instrument offered by the Government of Jamaica, declined but the 28 days instrument plummeted by 50 basis points to 5.54 percent from 6.04 percent out come at the January auction.
The 182 days instrument fell by 21 basis points to 5.73 percent but the 91 days instrument climbed back above the 6 percent mark to end at 6 percent, up from 5.94 percent in January.
Treasury bill Interest rates are coming from a high of 9.11 percent on the 182 days instrument, in March 2014 and has been falling since. The latest rates are the lowest since the early 1980s.
The issues were for a total of $400 million each, with the 28 days instrument attracting $569,799,800, the 91 days one pulling in only $418,580,000 and the 182 days instrument attracting $671,724,700.
21% fall in Treasury bill rates in a year
Treasury bill rates are continue to decline with the latest ones falling ones continuing the trend once more. Rates are down 20.6 percent on the 182 days Treasury bill notes since September last year or 165 basis points.
Rates on the latest issues of Treasury bill that were on offer on Wednesday September 16th, continued a slow decent since the start of 2015 but a much steeper decline form March last year. 
The two offerings for $400m each attracted bids for $721.8 million for the 91 days instrument and $786 million for the 182 days instrument, down from over $940 million each in August.
The 91 days instrument cleared at an average of 6.2 percent down from 6.352 percent at the August auction, with bids between 5.99 percent, to 6.3 percent being fully accepted. The 182 days yielded an average 6.35 percent down from August’s average of 6.49 percent. Bids between 6.2 to 6.4 percent, were fully allotted. Earlier, at the September 9th auction, the 28 days Treasury bill average rate came out at 6.228 percent after $707 million chased $400 million on offer.
The declines for the September issues come against the back ground of Bank of Jamaica cutting by 0.25 percent, its 30 days CD rates in August to 5.25 percent.
