Interest rates on Bank of Jamaica dropped to an average of 10.6 percent at the latest CD auction on Wednesday, April 24, following an offer of $34.5 billion to the public in a competitive price auction. The previous auction of $39 5 billion attracted only $37.8 billion in bids, resulting in an average rate of 11.032 percent.
In today’s auction bids amounting to just over $55 billion were received from 399 applications but only 257 were satisfied, with rates ranging from 9 to 11 percent. The latest offer brings the total amount of 30 days CDS to $125.7 billion which is down sharply from $155 billion on April 5, this year with the averaget rate then of 11.59 percent.
On April 22 the bank offered $14 billion in a 25 month CD that attracted $29 billion in bids and resulted in an average rate of 8.93 percent and put the total amounts in two year CDs to nearly $60 billion.
BOJ engineers cut in CDs interest rates
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.
BOJ sucks $11 billion from money market
Bank of Jamaica sucked more money from the financial market on Wednesday, April 5, pushing the total CDs outstanding to $99 billion, up from $89 a week ago, with the average rate holding steady under 8.5 percent for a second week but the total amount of CDs outstanding is still below the record of $109.5 billion on March 1.
The bank offered $34 billion in CDs and attracted $59.7 billion from 351 bids, with only 253 successful bids getting allocated funds. The offer elicited bids as high as 13.5 percent and as low as 8 percent. The interest rate for the highest successful bid was 8.749 percent and received 75.23 percent of the amount applied for, with the highest fully satisfied rate being 8.74 percent.
At the auction on March 29, a total of 438 bids amounting to $70 million chased after the $35 billion on offer, with 302 being successful at an average rate of 8.49 percent and resulting in $88.85 billion being quarantined by the central bank. The rate on CDs fell to an average of 8.85 at the March 22 auction from the prior auction rate of 10.54 percent.
Sharp16% plunge in BOJ CD rate
The latest Bank of Jamaica 30 days CD offer on March 22 resulted in the first significant shift in interest rates, with the average rate plunging by 16 percent to 8.85 percent compared with the previous one held on March 17 2023, delivered an average rate of 10.54 percent.
The drop in rates and the amount of funds in BOJ CDs are the first signals that interest rates will be going down in the months ahead with the low level of inflation the country is now experiencing, with a monthly average of 0.20 percent monthly since November last year accompanied by revaluation of the local currency in recent weeks.
While the previous offer attracted 250 bids amounting to $14.98 billion with yields as high as 13.17 percent, the latest offer pulled in 348 bids valued at $57.86 billion, but only $18 billion was offered.
The highest successful bids for the March 22 offer received 9 percent, down sharply from the March 17 yield. BOJ cut the amount of funds held in CDs to $81.85 billion, down from $92.85 billion for the March 17 offer and $104.5 billion at the February 24 auction, which resulted in an average interest rate of 9.87 percent. BOJ has eased the tight liquidity that characterized the market for several weeks.
BOJ CD rates holding steady
Fresh from hiking their overnight policy rate by 0.50 percent to 2 percent, Bank of Jamaica latest CD offer produced an average yield of 4.34 percent, with the lowest bid coming in at 4 percent.
BOJ offered to sell $9.5 billion of CDs and attracted twice that amount at $18.24 billion. The highest rate payable by the central bank is 4.475 percent, with only 44 percent of the amount of the bid being successful.
The previous CD auction held on November 9 attracted $17 billion for the $12 billion offered and resulted in an average yield of 4.22 percent, with the highest successful bidder getting 91 percent of the amount they placed in the auction with an interest rate of 4.65 percent.
BOJ one year CDs 2.74%
Bank of Jamaica’s one-year CD offering of $4.5 billion on Thursday, October 21, ended with an average interest rate of 2.74 percent, much lower than the 4.53 percent the 30 days CD cleared at this past week.
The one year instrument attracted 107applications amounting to $15.88 billion, of which only 27 were successful. The highest bidding rate was 8.99 percent for $423 million, but the highest successful rate was 4.76 percent, resulting in 29.4 percent of the amount applied for being accepted by the Bank of Jamaica. The highest rate payable on the full amount of $140 million applied for was 4.5 percent, while the lowest rate applied for was 1.495 percent on $400 million.
The issue is likely to be regarded by the country’s central bank as highly successful. The success of the issue should result in more longer term offerings to lock up liquidity in the market on a longer term basis than the 30 days instruments that are more costly for the bank and more challenging to manage as they mature on a more frequent basis.
Jamaica is now seeing rising interest rates following the Central Bank’s decision in August to raise as a result of surging inflation. Following that decision, 30 day CD rates climbed sharply and the Bank raised its Overnight rate from 0.50 percent to 1.5 percent in September.
More interest rate increase
Bank of Jamaica focus is not on the naysayers about its recent move on interest rates that saw the central bank hike overnight policy rate by 100 basis points to 1.5 percent as the average rate on their latest Certificate of Deposit that was offered on Wednesday, October 6, cleared at 3.28 percent up from 2.59 percent at the previous auction a week before.
At the latest auction last week, the central bank received 82 bids amounting to $18.5 billion for $12.5 billion on offer. A total of 51 bids were successful up to 4.25 percent and comes after BOJ increased the overnight rate.
The total nominal outstanding amount for the 30-day CDs on the settlement date of October 8 will be $46.5 billion, up from $45.5 million the week before. Since the start of August, the central bank CDS have pulled in an additional $11.5 billion by increasing the amount in the market from $35 billion.
BOJ paying 4 times July rates
It now costs the Bank of Jamaica nearly four times as much to manage the financial market as it did in July this year. After a long period of easy money, the country’s central bank recently announced that they were about to end the easy money policy in light of increasing inflation.
The most recent offer of CDs on Wednesday, September 22, fetched an average interest rate of 2.15 percent, with the highest rate of a successful bid being 2.99 percent and the lowest 1.75 percent. These rates are up from the previous auction, earlier in the month.
The outstanding number of CDs sits at $44 billion, up from $40 billion at the end of the month and $35 billion at the beginning of August. This week’s issue attracted 43 bids amounting to $14.77 billion for the total of $11.5 billion offer for the 30 days instrument. Only 29 submissions were successful.
On September 1st, an offer of $9 billion attracted 40 bids amounting to $14 billion. Only 18 were successful, resulting in an average rate of $1.51 percent, with the lowest bid coming in at 0.50 percent and the highest at 4.25 percent. The highest successful bid got 2 percent.
At the beginning of August, when the total amount of CDs was $35 billion, BOJ offered just $8 billion into the market and resulted in bids of $20.22 billion and resulted in an average interest rate of 0.59 percent, with the highest successful bid ending with a yield of just 0.62 percent, just higher than the banks overnight rate of 0.50 percent.
If the higher rates hold well into next year and beyond, there will be winners and losers. Banks with short term interest bearing instruments will enjoy a rise in revenues and on loans. Those with long data instruments will see capital losses unless their investment portfolio is balanced. Savers should see some increase in their interest income while borrowers will face increased interest costs. The move is likely to result in more appreciation of the Jamaican Dollar up to a certain level.
