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JMMB's money market report J$ Fixed Income Market Despite the large inflows (J$1.8 billion) that entered the market last Friday from maturing Treasury Bills and LRSs, liquidity in the Jamaican dollar fixed income market declined during the week. This occurred as the Central Bank intervened heavily in the foreign exchange market throughout the period. As a result, 30-day and 90-day secondary market rates rose by 25 basis points, reaching 14.75 per cent and 15.0 per cent respectively. Meanwhile, overnight rates, which started the week at about 8 per cent, rose to 12 per cent by mid-week and remained there. Next week, inflows are expected from the maturity of a 182-day Treasury Bill and coupon payments on LRSs VR 2007B, VR 20037, FR 11.50 per cent 2004, FR 15 per cent 2004, totalling approximately J$732 million. In addition, salary payments entering the system today should further increase liquidity in the system next week. Hence, secondary market rates are expected to decline in the coming week if the Bank of Jamaica limits its intervention in the foreign exchange market. Income tax payments due next Friday should help to reduce liquidity in the market, but the full impact is not expected to be felt until the following week. A Treasury Bill tender is scheduled for the coming week, the details of which are not available at this time.
Secondary Market Yields on GOJ Fixed Rate Instruments
Tenor (Years) Bid Ask 3 15.65% 15.40% 5 15.75% 15.50% 7 15.85% 15.60% 10 16.05% 15.75% 12 16.10% 15.80%
US$ Fixed Income Market
Liquidity in US dollar fixed income market rose during the week, resulting in the 30-day rates falling to between 9.0 per cent and 9.5 per cent from 10.25 per cent last week. Some brokers suggested that the inflow may have resulted from individuals converting Jamaican dollars into US dollars on concern the US terrorist attacks in the US could negatively affect the local economy. Next week, the 11.5 per cent Government of Jamaica (GOJ) Promissory Note will mature, releasing approximately US$29m into the market. Trading of GOJ eurobonds was very light at the beginning of the week as brokers were uncertain about what impact the attacks in the US would have on the market. As the week progressed, however, and the impact on the entire world became clearer, the markets reacted negatively. As a result, the price of the GOJ 2011 bond fell to 106 from 107 last week. Jamaican eurobond prices could fall further in the coming weeks as some brokers suspect that the international rating agencies are becoming concerned about the outlook for the country's Tourism industry.
Secondary Market Yields on GOJ US$ Global Bonds
Bid Ask Tenor
Foreign Exchange Market
The Jamaican dollar opened the week at approximately J$45.95: US$1, after hitting highs of J$45.90: US$1 last week. The Central bank responded by providing liquidity in the market at about J$45.80: US$1. However, the market did not respond noticeably to this intervention until Wednesday, when prices adjusted downward to J$45.88: US$1, and hovered around that level for the remainder of the week. It is expected that the local currency will trade within the range of J$45.50 to J$45.89: US$1 next week, as any price above this range will likely prompt intervention by the Central Bank. A further appreciation of the local currency is unlikely at this time as the pre-Christmas season is approaching.
Foreign Exchange Rates
GBP 66.90 67.30
Disclaimer
This information has been obtained from and is based upon sources that JMMB believes to be reliable. All opinions and estimates constitute JMMB's judgement as of the date of the report and are subject to change without notice. The above rates are indicative and do not constitute an offer to buy or sell.
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