Possible ease in interest rate in the coming days

Durrant Pate/ Contributor

Jamaica’s money market saw a slight tightening last week with the Bank of Jamaica (BOJ’s) aggregated current balances, down by J$1.76 billion from the J$33.06 billion posted on April 13.

As of April 20, a total of J$31.3 billion was in the market. Last week’s broker demand for the Jamaican dollar (JMD) remained low, particularly for short-term funds. Rates were stable from 7 per cent to 8.5 per cent in the short term to 9 per cent in the long run. 

Rates in the retail market also stayed consistent with brokers offering 6.5% to 9% on JMD placements. Money market analysts say we could see an ease in rates in coming weeks, following the recent decline in inflation. 

JMD auction oversubscribed

The average yield from BOJ’s competitive price auction last week decreased to 8.32 per cent versus 8.41 per cent in the prior week. The auction was oversubscribed with bids received totalling J$44.6 billion relative to the offer size of J$20 billion. 

The highest bid rate for full allocation was 8.35 per cent compared to 8.55 per cent in the prior week and coming down from 10.60 per cent in January, likely reflecting the falling inflation rate and inflation expectations. Notably, the Government of Jamaica is reentering the market by reopening the GOJ 10.00 per cent 2028 FR Benchmark Investment Notes. 

The offer volume is J$9 billion and the auction date  is tomorrow. Due to the relatively small size of this offering, it is not expected to have a significant impact on JMD liquidity.