Durrant Pate/Contributor

Fierce competition for cash is now characterising Jamaica’s money market, as tight liquidity conditions are intensifying, leading to strong competition for cash by market players.

This is in order to maintain liquid asset ratios and stay sufficiently liquid. As at August 11, 2022, a total of J$5.6 billion was in the local money market, as represented by the Bank of Jamaica’s (BOJ’s) aggregate current balances, representing a 13.65 per cent week-over-week increase. Consequently, rates are expected to remain elevated.

Market players were mainly square last week with very limited lending for one week, as high as 6.75 per cent to 7.40 per cent. The average yield from BOJ’s competitive price auction remains elevated with the yield on its 30-day Certificate of Deposit (CD) increasing to 8.64 per cent last week relative to 8.06 per cent in the prior week.

This is the sixth consecutive week of increase. The CD auction was undersubscribed with the highest bid rate for full allocation and highest submitted bid rate both standing at 10.999 per cent.

CDs remain at elevated rates

The elevated BOJ CD rates have caused demand for higher rates in the market. Additionally, three of the Government of Jamaica’s Benchmark Investment Notes were re-opened on August 10, 2022, of which, two were undersubscribed.

The total offer volume for the three notes was J$15 billion with allocated bids totalling J$10.5 billion. The average yields of the issuances ranged between 8.74 per cent and 9.98 per cent. Three treasury bills totalling J$2.2 billion were also offered to the market of which all were oversubscribed.

NCB Capital Market, its weekly market report, says, “this could have been primarily due to the treasury bills being shorter-term instruments for which there is currently a preference in the market. Additionally, the total offer volume for the notes was J$15 billion, which was significantly larger than that of the T-bills which was J$2.2 billion.”

The average yields ranged between 7.64 per cent and 8.42 per cent. All these offerings took significant liquidity from the market, as intended by the BOJ, especially in consideration of the BOJ USD Indexed bond with a value of US$121,621,700, which matured the prior week.