T-bill rates move up again

Interest on Treasury bills rose again in the latest auction held on 24 July 2013. On offer were two instruments seeking to raise $400,000 each for 91 Days and the other of 182 Days duration. Both instruments were oversubscribed, unlike the auction in June when investors shun the longer dated issues.

In the July auction investors bid $700,977,500 for the 91 day issue and $ 513,898,400 for the 182 Days. The average rates came out at 7.995 percent for the 91 day bill this is up 64.5 basis points over the rate of 7.35 percent in the June auction. The 182 Days instrument came out at an average rate of 7.88 percent 76 basis points higher than the 7.12 percent average out turn in June. Investors however got rates ranging from 6.24999 to 7.84951 percent for the short date bill and 5.99999 to 8.74999 for the longer bill which were allotted in full. The rate reached as high as 7.995 percent for 24.2 percent of the allotment for the 91 day instrument and 9 percent for a very small portion of the 182 day t-bill.

Business sector expects rates to rise

A survey conducted in May 2013 on behalf of Bank of Jamaica, soliciting the views of executives of the private sector showed that the business sector expects the 180-day T-bill rates to increase to 6.5 percent in the three months hence, up from the 5.4 per cent expressed in the previous survey. In the May 2013 auction, the actual interest rate for the 180-day Treasury bills increased to 6.44 per cent from 6.39 per cent in the April 2013 auction.

The majority of respondents expected that the Bank’s Open Market Operation (OMO) rate would remain the same over the next three months. This was similar to the views conveyed in the April and March 2013 surveys. The percentage of respondents that were of the view that the OMO rate would remain the same increased to 51.3 per cent from 43.0 per cent in the previous survey. The results from the overall survey about expectations for the OMO rate were largely corroborated by the views of respondents in the financial sector

BankofJamaicaBOJThe Statistical Institute of Jamaica (STATIN) undertakes surveys of businesses on behalf of the Bank of Jamaica to ascertain the expectations about variables which are likely to have an impact on inflation in the near-term. In this regard, the survey captures the perception of Chief Executive Officers, Managing Directors and Financial Controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages and salaries. These responses assist the Central Bank in charting future policy decisions.

BOJ raises rates to attract money

Bank of Jamaica, the country’s central bank, pushed up rates on its open market operations when it announced the latest series of CDs to mop up liquidity of Jamaican dollars.

At the last Treasury bill auction, investors sent a clear signal that they wanted higher rates to take on the risk of tying up their funds for more than three months. Will this move result in higher rates in the financial markets for the rest of the year? Some persons are of that view in light of the tight situation with the foreign exchange market. There is also the view that with the government pulling more revenues than originally projected and generating a smaller deficit than planned so far, the rest of the year could prove tight economically thus reducing demand in the country and by extension foreign currency.

According to a release from the bank, “To augment its liquidity management operations, the Bank of Jamaica will be offering two variable rate instruments commencing Tuesday, 09 July 2013 to Friday, 12 July 2013.”

The previous issue was priced at 6.99 percent for the 365 days instrument, 36 basis points lower than the current one.

The instruments on offer are:

  1. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices semi-annually at 0.23 percentage point above the six month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first six months is 7.35 per cent per annum.
  2. An 18-month Certificate of Deposit, for an unlimited amount. The instrument re-prices semi-annually at 0.25 percentage point above the six month GOJ Treasury Bill rate existing at the start of each re-pricing period.

The initial coupon for the first six months is 7.37 per cent per annum. These offers are available directly to Primary Dealers and commercial banks. Other investors may access these instruments through a Primary Dealer. The term sheets for these Certificates of Deposit will be circulated via electronic mail to all Primary Dealers and commercial banks and will also be available on the Bank’s website at  www.boj.org.jm

The bank says that it will continue to offer its regular 30-day Certificate of Deposit at the current interest rate of 5.75 per cent per annum.

The previous issues which were available between Monday, 01 July 2013 to Thursday, 04 July 2013 carried the following terms:

  1. Variable Rate Certificate of Deposit 2013(D) which was originally issued on 12 June 2013 and is now being re-opened for a limited nominal amount of $2.0 billion. The tenor for the re-opened instrument is 164-days. This instrument maintains the original issue terms, viz, the initial coupon is 6.77 per cent per annum up to the first interest payment date on 12 September 2013 and re-prices quarterly at 0.15 percentage point above the three month GOJ Treasury Bill rate for the next interest payment date up to the maturity date on 12 December 2013.
  2. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices quarterly at 0.23 percentage point above the three month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first three months is 6.99 per cent per annum.

What’s BOJ up to in FX & money market?

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In Friday’s foreign exchange trading, authorised dealers bought much more foreign exchange than they sold and in a late after hours release, Jamaica’s central bank again decided to mop up more local funds from the financial system.

The timing of the release isn’t isolated from the developments in the foreign exchange market. It seems that the CD issue is linked to what the central bank may consider to be holding of a long position in US dollar by financial institutions. According to the release from the bank, the issues are “to augment its liquidity management operations, the Bank of Jamaica will be offering two variable rate instruments commencing Monday, 01 July 2013 to Thursday, 04 July 2013. The release comes against the back drop of the day’s trading when authorised dealers bought more than US$32 million and sold only US$24.5 million with the rate for the US dollar hardly trading.

The instruments being offered are:

  1. Variable Rate Certificate of Deposit 2013(D) which was originally issued on 12 June 2013 and is now being re-opened for a limited nominal amount of $2.0 billion. The tenor for the re-opened instrument is 164-days. This instrument maintains the original issue terms, viz, the initial coupon is 6.77 per cent per annum up to the first interest payment date on 12 September 2013 and re-prices quarterly at 0.15 percentage point above the three month GOJ Treasury Bill rate for the next interest payment date up to the maturity date on 12 December 2013.
  2. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices quarterly at 0.23 percentage point above the three month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first three months is 6.99 per cent per annum.

These offers are extended to all Primary Dealers and commercial banks, from 01 July 2013 to 04 July 2013. The term sheets for these Certificates of Deposit will be circulated via electronic mail to all Primary Dealers and commercial banks.

The Bank says they will continue to offer its regular 30-day Certificate of Deposit at the current interest rate of 5.75 per cent per annum.

This is the third CD offering within a month and is in conflict with the view that the government wants the rate of the Jamaican dollar to fall as well as utterances from government’s spokesmen that the continuing devaluation is to ensure that the country has a competitive exchange rate. The measures are meant to tighten liquidity which means that there will be less Jamaican dollars  available to purchase foreign exchange thus resulting in either stability in the exchange rate or a revaluation of the currency.

Read more about the BOJ’s intervention in the FX market, Market demand is not driving J$, BOJ is click here.

Long dated T-Bills snubbed as rates rise

MOFInvestors snubbed the longer dated Treasury bills instruments as they stayed at the short end of the interest rate spectrum with an oversubscription for the 30-day Treasury bills but left unfilled the 3-month and 6-month instruments at today’s auction to raise $1.2 billion for the Government of Jamaica.
Treasury bills maturing Friday, 19 July 2013 attracted $499,693,300 for the $400,000,000 that was available and provided yields of 5.5 percent to a high of 7.534 percent with the average yield being 6.02245 percent to successful bidders.
The three month issue that matures on Friday, 20 September 2013 for $400,000,000 but only attracted $284,330,500 and provided yields of 5.5 percent to a high of 7.81356 percent, with the average yield being 6.75847 percent, representing an increase of nearly 15 basic points over the May issue.
The development today is in contrast to the May 24th Treasury Bill auction when both the six months and three months’ issues were heavily oversubscribed twice over. The average yield for the three months was then 6.6197 percent with a range of 5.54998 to 6.68779.
The six month issue that matures Friday, 20 December 2013 was also for $400,000,000 but attracted just $201,628,400 but provided yields of 5.99999 percent to a high of 8.28964 percent with the average yield being 7.1203 percent, resulting in an increase in rates of 68 basic points.

The six months instrument yielded between 5.75 percent and 6.8799 percent with the average being 6.4437 percent in May.

Barbados raising BDS$150M

The Government of Barbados has announced the issue of two bonds, one a debenture and the other Treasury notes to raise BDS$150 million in total, starting on the 24th June.

The debenture which will open on Monday, June 24, 2013 and will be issued at par with a fixed interest rate of 6 7/8% per annum payable on June 30 and December 31 of each year and is targeted to raise BDS$100 million.

The Treasury Notes targets BDS$50 million and will be issued at par with a fixed interest rate of 4 1/8% payable on June 30 and December 31 of each year. The Treasury Notes will be repayable at par on June 30, 2015.

The interest due on both instruments to Pensioners 60 years and over residing in Barbados will not be subject to withholding tax. Non-residents seeking tax exemption must satisfy the Commissioner of Inland Revenue of their status before exemption is granted. However, for all persons resident in the island, the interest from these Debentures will be taxed separately from other income at a rate not exceeding 12½%. These Debentures will be repayable at par on June 30, 2024. The issue will remain opened until the Central Bank advises that it has been fully subscribed.

BOJ issues 2 new CDs

Jamaica’s Central bank has just announced the issue of two Special Variable Rate Certificates of Deposit targeted at Primary dealers to augment its liquidity management operations.  The issues which are variable rate instruments are being offered from today Wednesday, 12 June 2013 and will be opened until to Tuesday, 18 June 2013. The instruments are:

  1. A 183-day Certificate of Deposit, for a limited nominal amount of $3.0 billion. The instrument re-prices quarterly at 0.15 percentage point above the three month GOJ Treasury Bill rate existing at the start of each repricing period. The initial coupon for the first three months is 6.77 per cent per annum. This offer is extended to all Primary Dealers and commercial banks, from 12 June 2013 to 18 June 2013.
  2. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices quarterly at 0.23 percentage point above the three month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first three months is 6.85 per cent per annum. This offer is extended to all Primary Dealers and commercial banks, from 12 June 2013 to 18 June 2013.

This is the second such issue in weeks as the most recent one closed last week Friday and seemed to have delivered a fair amount of foreign currency to the central bank.

T&T Govt bond heavily oversubscribed

The auction of the Government of Trinidad and Tobago $1.0 billion 7-year 2.60% bond due 2020 was heavily oversubscribed with total bids received amounting to $2,754.903 million. The bonds are to be dated May 21, 2013.

The bond was allotted at a premium with a clearing price of $104.23 per $100.00 face value, offering investors a yield to maturity of 1.95 per cent. Bids at $104.23 were pro-rated to allocate approximately 47 per cent of the amount applied for at this price, while competitive bids submitted at a price lower than this ($104.23) were rejected. Successful competitive bidders, as well as non-competitive bidders, will be required to pay the clearing price for the bond.

The high level of oversubscription and the low interest rate being received by investors indicates that there is still a bit of excess liquidity in that market.

TT government moves to mop up liquidity

The Government of the Republic of Trinidad and Tobago proposes to raise TT$1,000 million through the issue of a 7-year bond with a coupon rate of 2.60% per annum to mop up excess liquidity in the financial market.

The bonds will be issued through the automated auction system operated by the Central Bank. The issuance of this bond will reduce excess liquidity levels in the banking sector in accordance with established monetary policy, while the proceeds of the bond will be held in a frozen account at the Central Bank on behalf of the government. The issue document stated.

A single price auction system will be used and, as far as possible, applicants will be allotted bonds to the fullest extent of their applications. Government Securities Intermediaries are appointed by the Central Bank to act as counterparties in the auction and, thereafter, to provide a secondary market for the bonds. Bids can be placed competitively or non-competitively by submitting the relevant application form, along with payment to a Government Securities Intermediary. The maximum allotment that can be obtained through a non-competitive bid is $100,000 face value at a price established in the competitive side of the auction. This price is the minimum price, when the successful bids are ordered from the highest price to the lowest price and may be at par, premium or a discount.

The government in the offer document that it is also mindful of its role in the development of the local capital market and, in particular, the development of the government bond market. To this end, it continues to provide securities that will cater to the needs of all investors.

The auction will be opened at 10:45 a.m. on Monday May 6, 2013 and will close at 1:00 p.m. on Friday May 17, 2013. Bonds will be dated May 21, 2013.

Daily Trading 1 May 2013

JSE | Highest since February

The stock market reached its highest level since February 11 when measured by the all Jamaica composite index as it crossed over the 82,000 level. In the case of the main market index, Wednesday’s level was the highest since mid-March. But on one of the more lackluster days, there was a mere $9,166,322 expended in trading, as advancing stocks just outnumbered declining ones by 8 to 7.

JSEINdicesMay1

Stock gaining | Stocks with any noticeable movements were, Berger Paints up 31 cents, to close at $2.26, a day after the company announced that the CEO Warren McDonald would be retiring shortly. Investors snapped up 33,112 of the company’s shares between $1.97 and $2.26. Carreras inched up 83 cents, to close at $55.03 with 17,078 units trading. Lasco Manufacturing climbed 90 cents to $11.05 with a mere 1,700 units trdingand Lasco Financial moved to a new 52 weeks high at $7.60 on moderate volume, Supreme Ventures gained back 10 cents it lost on Tuesday, to close at $2.60 with just 19,000 shares trading. General Accident gained 4 percent to close at $1.70 on the 184,887 shares that traded, between $1.65 and $1.70.

Stocks Losses | Consolidated Bakery, bakers of Purity and Miss Birdie brand of baked products, fell 40 cents to $1.20 with only 300 units sold, as interest in the stock fell away when the company released final year 2102 results that showed a sharp drop in profits, compared with 2011. The company had reported $3.7 million after tax profit compared to $12.8 million in 2011, before gain from disposal of shares. The stock looks set to fall some more unless the first quarter results, which are due in another two weeks, come out early and show positive growth in earnings that could change investor sentiment to the stock.

Stocks in demand | While levels of stocks trading on Wednesday was low, there were 9 companies stocks that had bids higher than their last selling prices, a bullish indicator. These companies include Blue Power, Desnoes & Geddes, Mayberry, Lasco Distributors, Sagicor Investments, Jamaica Producers, Pan Jamaican, Scotia Investments and KLE Group, a company that provides entertainment and restaurants services, that fell to $2.75 at the last traded price, well below the IPO price of $3.70.

TTSE | Witco Jumps to TT$100

West Indian Tobacco Company hit a record TT$100 in today’s trading on the TT Stock Exchange with the largest gain on the market as it increased $2.93 to end the day’s trading. At the end of 2012 the stock traded at $85. Scotia Bank gained 21 cents to land at $69.24 and is up from the December 2012 close of $65.51 while Sagicor Financial gained 14 cents and closed at $7. All three traded below 750 shares each.

A total of 400,834 shares crossed the floor of the Exchange with a value of $3,204,224.37 as 12 securities traded during the day with 6 advancing, 2 declining and 4 trading firm.

TTSEMay1

Angostura Holdings traded 233,615 shares to be the market leader, the value of the shares traded was $2,128,611.97 but the stock fell 39 cents to close $9.11, this was followed by Trinidad Cement with a volume of 137,331 shares valued $137,331.00. National Enterprises contributed 12,576 shares with a value of $196,185.60, while Republic Bank added 6,144 shares valued at $669,081.60.

Clico Investment Fund was the only active security on the Mutual Fund Market, posting a volume of 45,170 shares valued at $948,930.93 and advanced by $0.01 to end at $21.01. Fortress Caribbean Property Fund which last traded at $5.00 did not trade as did Praetorian Property Mutual Fund that last traded at $3.40. There was no activity in the Second Tier Market.

ForEx | J$ revaluation continues

ForExSummaryMay1The rate of exchange between the US and Jamaican dollars continued to inch down, even as the amount of US dollars sold in the system in the last two days exceed the amount purchased by authorized dealers. The average selling rate, fell to J$99.3286 from $99.3481 on Tuesday and $99.36 on Monday. Both the amount of funds purchased US$29.3 million by the dealers and that sold, US$36.6 fell on Wednesday by US$16 million on the buying side and US$18 million on sell side, compared to Tuesday’s trade. The rate of exchange has appreciated from a low of J$99.81 on April 12th.

Interestingly, the currency was sold between $104.27 to a low of $81.49 while the highest price paid for purchase was $99.70. On Tuesday sale took place between $104.27 to a low of $96.4 while the highest price paid for purchase was $99.50 to a low of $81.37.

Too early to say | While the Jamaican dollar has been slowly appreciating since last week, it is too early to say where it will end in the short term. The government announced on Wednesday that the IMF agreement was signed off by the IMF board and will release almost US$200 million for the central bank’s reserves. The amount is not large, but there are more flows that will be coming in during the year that could result in further appreciation of the local currency. Persons who bought FX for investment purposes could well be offloading some into the market if the daily rate shows signs of the currency appreciating for a number of days to come.

ForExDEtailsMay1

Treasury Bills | TBill rates climbed in April

BankofJamaicaBOJIn March, the average yield for the 90 days was 5.82488 percent but bids up to 6.24999% were successful as only $338.7 billion chased after the $400 million on offer. In April, things changed a lot with the average yield climbing nearly 86 basis points to average out at 6.68297 percent. This took place against the background of a 41 percent oversubscription coming against the fall in rates in March when there were less bids for the amount on offer. Allotment was made for successful bids between a low of 5.15 percent and a high of 7.1 percent per annum.

The six issues fared better as average yield climbed a bit moving up to 6.389 percent compared to what the six months bill yielded in March when the yield came out at an average of 6.22345 percent per annum. But while in March the range was 5.50% to 6.65310, only $196 million went after the $400 million on offer, The April auction had 708 million seeking to capture some of the $400 million offer but bidders were successful in garnering between 5.4 percent and 6.65 percent for this instrument. In March, a 30 day treasury bill was oversubscribed by $58 million with yields between 4.5 percent & 6.1 percent.

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