Interest rates on the last government of Jamaica Treasury bills averaged 8.27 percent on the 182 days instrument in November, the highest level since December 2012 at 9.12 percent.
The rate is well over the trend since 2013, which suggests it should be just over 3 percent on a longer term. In 2013, the rate did not remain at its peak for long and continued decreasing gradually. It rose again to 9.11 in March 2014 for a brief period and fell to 6.99 percent by January 2015 and moved gradually down to under two percent by 2018.
While the Bank of Jamaica has only recently pushed the Overnight rate to 7 percent the 182 days, Treasury bill rates were around 8 percent from April this year when the average was 8.46 percent and moderated slightly downwards since an indication that the market has determined that these rates are at or close to the peak. The decline in rates should start in the first half of 2023 and could adjust downwards gradually, as was the case in 2014.
The attached chart shows the trend-line slopping from the left side of the chart and reaching around two percent, with the current rates being well over trend, an indication that the recent hike since last year is not sustainable and could start to decline not too long from now with inflation rate now closer to 7 percent and falling.
Whether Jamaican interest rates?
Treasury rates at 18 months low
The latest results for Treasury bill auctions, show a decline in the interest rates on all three instruments offered to the public. Importantly, the 182 days note fell to the lowest level, since June 2013, when the rate was 7.12 percent.
At the latest auction dated December 19, 2014, the average rate on 28 days instrument, ended at 6.38 percent. The rate fell from sharply, from 6.71 percent in November and 6.826 percent in October as $686 million chased the $400 million on offer.
Investors, demand for the 91 days Treasury bills offered, continued to climb, dropped to only $531 million from to $1.042 billion for the November auction. Demand for the longer-term 182 days instrument, was for $942 million for the latest auction in which the amounts available was $400 million for all three Treasury bills on offer.
The Treasury bill for the 91 days period, Friday, December 19 to mature on Friday, March 20 next year, attracted an average yield of 6.956 percent a moderate fall from November’s 7.052 percent, and 7.336 percent in October and 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 June 19, 2015, attracted $925 million for the $400 million on offer resulting in an average interest rate yield of 7.14 percent, down from 7.387 percent at the November’s auction. At the October auction the average rate declined to 7.73187 percent 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 auction, the rate came out at 8.932 percent.
T-bills chased in September, push down rate
Government of Jamaica Treasury bill sample
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.
