Jamaica’s Central Bank is pumping a great deal of life into the Jamaican dollar, lifting the value from just under J$158 to one United States dollar in February this year, to under $155 currently and driving rates on CDS up by almost 26 percent from a year ago, as the bank moves aggressively to bend year over year inflation within the mandated 4-6 percent, from 6.20 percent to February.
Liquidity in the financial has been drained with BOJ pulling out all available liquidity. At the most recent auction of Certificate of Deposits, the bank offered $42.5 billion to the public and attracted bids amounting to $43.16 billion, resulting in an average yield for successful bids of 11.12 percent, with the rate of 13.29 percent being partial satisfied.
The total outstanding 30-day CDs now amount to $157.5 billion, in contrast, a year ago the total outstanding 30-day CDs was $81.85 billion with the average yield at that auction being 8.85 percent.
Revaluation of the Jamaican dollar is critically important in curbing inflation as it cuts the cost of imported items and, most importantly, the cost of fuel that feeds into a wide array of goods and services. These include petrol for vehicles, electricity for households and businesses and powering the water supply. Of course, it affects other imported items such as foods clothing to name just two.
BOJ pumps life into J$ with high interest rates
BOJ CD rate dips under 8%
BOJ CD rates dipped under 8 percent for the first time since October 2022, data out of the Bank of Jamaica shows.
The Central Bank’s offer of $20 billion to the public attracted $27 billion from 216 bids in going after the amount offered with rates ranging from 7.15 percent to a high of 10.10 percent, with the highest successful rate coming in at 8.16 percent.
The average rate for accepted bids is 7.97 percent from 173 successful bids and represents the eighth consecutive fall after peaking at 10.54 percent in early March. The auction will result in the total amount of 30 days CDs standing at $104 billion, up from $101 billion previously.
BOJ CD rate lowest since October
At the latest auction of the Bank of Jamaica Fixed Rate Certificate of Deposit held on Wednesday the average interest rate declined for a 7th consecutive week after $52.366 billion chased after the $32 billion on offer to yield an average of 8 percent some 24 percent lower than the auction March 15 when rates peaked at 10.54 percent.
Today’s rate is the lowest since October 26 last year with an average of 7.68 percent and seems like a prelude to the central bank cutting the overnight rate this month, with inflation running at the lowest level in more than three years.
The bank received 277 bids of which 214 were successful, with the highest rate submitted being 10.25 percent but the highest successful rate was just under 8.15 percent.
The auction will result in $103 billion due on the 30 days CDS, down from $108 billion last week.
BOJ CD rate falls again
Rates payable on Bank of Jamaica CD instruments declined for six consecutive weeks following applications received in response to an offer of $32 billion by the Bank of Jamaica today and resulted in an average yield of 8.11% for successful bids, down from 8.32 percent last week.
The auction attracted 257 bids for just over $46.43 billion, with 199 successful. The lowest submitted rate was 7.5 percent and the highest at 10.25 percent, down from 11 percent in the previous auction, with a partially successful bid at 8.25 percent, down from 8.35 percent previously.
The total amount of 30 days CDs is now $103 billion, down from $106 billion last week.
More decline in interest rates
Bank of Jamaica’s latest CD offer of $20 billion attracted 186 bids amounting to $44,629,464,000, but only 75 bids were successful and resulted in the average yield of 8.32 percent for successful bids, that is down from 8.41 percent at last week’s auction and represents the fourth decline since the rates closed at 10.54 percent for the March 17 CDs.
The lowest bid at this week’s auction was 7.50 percent, down from 8 percent last week and the highest bid was 11 percent, but the highest rate for total allocation was 8.349 percent, with the highest rate for partial allocation being 8.34999 percent resulting in success for 99.30 percent of the amount applied for.
The total nominal outstanding amount for the 30-day CDs on April 21 will be $106 billion.
Interest rates are down again
Interest rates declined in the latest auction of CDs placed on the market by the Bank of Jamaica, with the average rate falling to 8.41 percent from 8.49 percent at the auctions over the past two weeks.
The rate is slightly ahead of the 91 days Treasury bill rate of 8.136 percent, which was determined at the Treasury bill auction held on April 12 and 8.315 percent for the 182 days Treasury bill.
The central bank offered $17 billion and received offers amounting to $40.7 billion from 275 bids, with 161 being successful, down from the previous week of 351 and 253 successful bids. The lowest bid was at 8 percent, the same as the prior week, and the highest bid was at 11.5 percent, down from 13.5 percent, but the highest successful bid was 8.59 percent, a fall from 8.749 percent.
At the close of the auction, the amount pulled from the financial market was $104 billion, up from $99 billion the previous week.
BOJ CD rate drop for a second week
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.
Jamaica’s interest rates holding for now
Zero inflation in December and prospects that low to negative inflation for the first four months of 2022 might have checked the move by the Bank of Jamaica to further engineer further increase in interest rates at this time.
At its latest Bank of Jamaica certificate of deposit (CD) auction, in the amount of $11 billion that was auctioned last Wednesday, January 4, the yield held, for the 30 day instrument, remaining the same as the out turn at the December 29 auction, at 4.13 percent, marginally lower than the rate in mid October.
Bids amounting to $21.53 billion were received covering 85 applications. There were 49 successful Bids with rates ranging between 4 and 4.2 percent. The highest bid was 5.5 percent for $1 million that was not successful.
Bank of Jamaica reduced the amount of CDS to $36.5 billion that is down from $46.5 billion at the peak late last year in mid-October, with the average rate at 4.17 percent.
BOJ now paying more than 4.5% on CDs
Interest rates rose to 4.53 percent in the latest Bank of Jamaica 30 day CD offering of $9.5 billion on Wednesday this week, up from 4.17 percent on Wednesday, October 13 and ended with total CDs outstanding falling by $2 billion to $44.5 billion, but there are signs that rates may be peaking, at least for now.
Signs that the rates may be peaking for a while are visible by the decline in the highest bidding rates and the much larger sum applied for at the minimum rate compared to the previous auction. The highest rate payable on the CDs is 5.5 percent, while the lowest rate applied for was 3.75 percent for $2.5 billion, this contrast with the previous auction in which the lowest bid was just $58 million at 3 percent. The highest submitted bid rate came in at 7 percent and is down from 7.99 percent in the previous auction. The auction attracted $14.74 billion from 42 applications, with 24 being successful.
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.
