GOJ enjoys lower Interest cost

May 31, 2015 by

Jamaica's Ministry of Finance newest office building

Jamaica’s Ministry of Finance newest office building

The payment for interest on the country’s huge national debt in April by the government of Jamaica ended at $900 million less than budgeted. The total amount paid is also less than that paid in April last year.
Interest payments amount to $7.376 billion compared with $8.168 billion budgeted and is down on the $7.875 billion paid in 2014. The expenditure saw a near $1 billion savings from the budgeted amount for local debt of $4.588 billion, compared to the budgeted sum of $4.547 billion, there was a slight increase in the cost of foreign debt to $2.788 billion, versus $2.621 billion budgeted.
The fall in the interest cost on the local debt would have occurred as a result of Treasury bill rates having fallen at the time the budget was crafted and April, with government having variable rate instruments funding its operations. The cut in the cost amounts to a large 20 percent and if the savings were to continue for the rest of the fiscal year, the savings could be around $12 billion on the amount of $63 billion allocated to pay interest on the local debt.
Overall revenues collected by government was $28.26 billion, a shade less than forecast at $28.6 billion while recurrent expenditures of $41.56 billion were under budget of $42.77 billion. The short fall in revenues is due to the absence of bauxite levy of $147 million budgeted and grants that came in at only $67 million versus $665 million in the budget.

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Treasury bill rates slide continue

April 22, 2015 by

Government of Jamaica Treasury bill rates, declined in the latest auction of the short-term debt instruments, opened today at the Bank of Jamaica offices. The 182 days instrument closed at its lowest level since May 2013 when it then cleared at 6.44 percent.
At today’s auction the average rate came in at 6.787 percent, down from 6.998 percent in March and the 91 days ended at 6.06 percent, a decline that is well down on the previous rate of 6.72765 percent. TB -4-15
The declines come against the background of consistently falling rates since the start of the second quarter last year, negative inflation and a cut this month in Bank of Jamaica’s CD rate, from 5.75 percent to 5.50 percent.
The implications of the fall include potential for lower lending rates down the road, stimulation of interest sensitive investments such as stocks and long term bonds and of course persons looking for income from fixed interest securities will be getting less income going forward than in the recent past.

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BOJ cut interest rate

April 17, 2015 by

BOJ 3The Bank of Jamaica’s 30-day Certificate of Deposit interest rate was reduced on Friday, 17 April 2015 Thursday to 5.50 percent from 5.75 percent, the central bank announced on Thursday. This is the first such reduction since February 2013, when the rate was cut by 50 basis points from 6.25 percent to 5.75 percent.
BOJ in its release stated, “this adjustment to the BOJ policy rate, reflects the Bank’s expectation that the rate of increase in consumer prices is likely to remain low in the coming year”.
“The recently announced inflation rate of 4 per cent for FY 2014/15 is the lowest in 48 years. The sharper than expected decline in inflation for the fiscal year was due in part to the fall in oil prices but also to the moderation in price increases that has resulted from fiscal consolidation and economic reforms. The impact of these changes will help to moderate inflation impulses over the medium term” the central bank concluded.
The reduction is also in line with a decline in Treasury bill rates over the past year, coupled with increased inflows of foreign exchange into the system that led to some amount of revaluation of the Jamaican dollar.

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Treasury bills rates mostly fall

March 19, 2015 by

Interest rates are down on the latest issue of treasury bills compared with the out turn in February, for the three and six months instruments but the 28 days instrument enjoyed a slight increase compared with the rate at the February auction.
Tbill 3-15The 182 days bill ended with an average rate of 6.99 percent and is back to the level at the January auction. The highest rate allotted for the latest issue is 7.16 percent, while $948 million chased after the amount offered.
The 91 days instrument attracted bids for $720 million and resulted in an average rate of 6.3 percent with 6.8 percent being the highest rate allotted. The average rate for the February auction came in at 6.88 percent.
The 28 days instrument attracted bids for $655 million and resulted in the average rate being 6.7278 percent with the highest rate allotted being 6.9 percent. The average rate for the February auction was 6.417 percent.
All three auctions had $400 million each on offer to the public.

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Treasury-bill rates up

February 19, 2015 by

Interest rates on government of Jamaica latest Treasury bills auction rose for the first time since peaking in March last year. The three offerings at the February 20 auctions, resulted in a rise in rates for the 28 days and the 182 days notes, while the rate on the 91 days Treasury bill declined moderately.
TB -2-15The 182 days note closed at 7.164 percent, an increase from 6.99 percent at the January auction. The rate for the 91 days Treasury bills fell to 6.8796 percent, slightly down from of 6.8817 percent in January, while the rate on the 28 days ended at 6.417 percent up, from 6.295 percent at the January auction.
The change in the movement is consistent with the slowing pace of change at which the 182 days treasury rates were falling, having slowed from 0.34 percent dip in November to 0.15 percent at the January issue.
With Bank of Jamaica’s projection for inflation in 2015, in the range of 3-5 percent and with inflation for January coming in at negative 0.5 percent, its unlikely that the latest increase in the rates will last for too long, as there will be lots of room for the treasury rates to decline sharply in the months ahead.
All three instruments offered, were for $400 million each, with demand for the 28 days instrument amounting to $690 million versus $1.15 billion in January. The 91 days instrument attracted $1.298 billion up from $706 million in January and the 182 days instrument pulled in $822 million up from $717 million at the January auction.

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Barita Faces challenges but..

February 10, 2015 by

Barita280X150Barita Investments profit after tax dropped 21 percent to $46 million for the quarter ending December 2014 compared to the similar period in 2013, from total revenues of $345 million and net operating revenues of $177 million. In 2013, the company that is involved in stockbroker and fund management reported net operating profit of $165 million but increase expenses helped to pull down profit for the quarter.
Interest Income contributed $230 million to revenues, 15 percent below the prior year, while related interest expense remained flat at $168 million.
Barita is suffering from a mixture of assets priced for shorter periods than the funds clients’ invest with them. According to Chairman Rita Humphreys, “in an environment where interest rates have decreased, our liability costs have been similarly reduced resulting in our interest expense decreasing to prior year levels. However, with our investment portfolio comprising of approximately fifty percent variable instruments, our interest income has decreased at a faster rate. This has resulted in a significant contraction in our margins resulting in a recorded net interest income of $62 million, approximately 36 percent down from prior year.”
Fees and Commission income rose 65 percent above prior year to $38 million, with improvement coming from the subsidiary Barita Unit Trusts. Additionally, trading gains were 600 percent above prior year at $48 million compared to only $8 million in 2013. Depreciation of the Jamaican resulted in translation gains of $21 million down from $29 million prior year.
“Staff and administrative expenses contributed to a 16 percent increase in operational costs when compared to the same period last year. Staff costs increased by 10 percent which was triggered primarily by additional human resources and remuneration adjustments. Administrative costs were 25 percent higher than last year, with the main contributors being financial support for our charity arm the Barita Education Foundation and client support expenses,” the report to shareholders stated.
Interest rate developments, with Treasury bill rates continuing to fall and the change in the method relating to the repo business could put further pressure on income for a while. At the end of the quarter fair value reserve amounted to $107 million which could be realised in subsequent quarters and thus boost earnings. Falling T-Bill rates should result in gains in longer term Jamaican fixed interest rates securities and pickup in interest now seen in the Jamaica stock exchange is likely to hand Barita increased fee income during the balance of 2014.

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Business sector don’t get it

November 26, 2014 by

BOJ 3Jamaica has to rely on the private sector, to help lift it from the economic quagmire it finds itself in, for the past 3 decades. A look at certain data shed some light on the task the country faces.
It tells of a nation where the business sector leaders seem to be managing more from the seat of their pants than based on properly informed position. Take the case of inflation, which ran at 5.1 percent up to August, for 2014, for an average of just less than 0.68 percent per month, and against the back ground of slippage in the exchange rate in the early months that would have helped spike inflation then. With an almost stable Jamaican dollar in September a survey done by the Statistical Institute of Jamaica on behalf of the Bank of Jamaica to ascertain the expectations of Chief Executive Officers, Managing Directors and Financial Controllers about the future movement of prices in September this year, to which 270 responded, found that their expectation for inflation for 2014, will end at 10.2 percent. On what basis is they arrive at this forecasted amount.
Interestingly, the official inflation rate to October is 7.3 percent, the full year’s figure should hoover around this level with the price of oil on the world market having declined sharply, pulling some local cost down with it.
The business sector record on business confidence both on the current state as well as a year out has no better record as ca be seen from the wild fluctuation in the periodic results.
On the matter of Treasury bill rate, while rates have been declining monthly from a peak in March, this year. The survey respondents expected the rate for the 182 day Treasury bill to come out at 8.6 percent at a time the rate had already declined to 8 percent. Admittedly, the interest rate forecast is not totally inconsistent with the managerial group inflation forecast, as investors would want to be compensated with an interest rates above the inflation as they see it. But if the inflation rate forecasted is as high as the private sector figures there would also be need for a greater slippage in the rate of exchange for the Jamaican dollar versus the US dollar. Yet their perception that the exchange rate would slip by 1.3 percent by the end of 2014 from September, would not be in keeping with the high inflation rate they projected.

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Treasury-bill rates fall again

October 23, 2014 by

Government of Jamaica Treasury bill sample

Government of Jamaica Treasury bill sample

The amount of funds trying to find a home over the next 3 months, jumped sharply to $903,521,900 from September’s $641,904,600, chasing after the $400 million 91 days Treasury bills offered for October.
The Treasury bill for the period Friday, October 24 to mature on Friday, January 23 next year, attracted an average yield of 7.336 percent, down from 7.46952 percent, at the September auction. At the August auction the average rate out turn was 7.46767 percent. The yield for July was an average of 7.63643 percent, for the June issue 7.65893 percent and 8.2 percent in May, for the Treasury bill of same duration.
The offer of 182 days duration, maturing on April 24 next year, generates an average interest rate yield of 7.73187 percent, a decline from 7.99887 percent, at the September auction, 8.11578 percent, in August, 8.21982 percent at the July’s auction and 8.36502 percent for the June issue, of the same duration. At the May Treasury bill auction, the rate came out at 8.932 percent.

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T-bills chased in September, push down rate

September 20, 2014 by

Government of Jamaica Treasury bill sample

Government of Jamaica Treasury bill sample

The amount of funds trying to find a home over the next 6 months, jumped sharply to $1,050,907,900 that chased, the $400 million 182 days Treasury bills offered for September, compared to $745,290,300 in August.
Investors are clearly seeing a continuing trend of lower rates into the future, and moved their focus to the longer end of the Treasury bill spectrum and less so on the shorter term ones. The offer of 182 days duration, matures on March 20 next year, will generate an average interest rate yield of 7.99887 percent, down from 8.11578 percent in August, 8.21982 percent at the July’s auction and 8.36502 percent for the June issue, of the same duration. At the May Treasury bill auction, the rate came out at 8.932 percent.
The Treasury bill for the period Friday, September 19, maturing on Friday, December 19 this year, for the duration of 91 days, attracted bids of $641,904,600 (August $639,068,500 and July $732,981,900) for the $400,000,000 on offer. The average yield came out at 7.46952 percent, slightly up on the 7.46767 percent average rate out turn in August. The rate for the June issue was 7.65893 percent and 8.2 percent in May, for the Treasury bill of same duration.

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