SECONDARY market rates continued to climb this week on the accumulative impact of private issues initiated by the Government, the amount of which could not be determined. Despite a hefty inflow of $5.3 billion from LRS coupon payments, and the maturity of Treasury Bills and BOJ COSH instruments, the market scarcely showed any sign of liquidity. The Thirty-day market traded as much as 25 basis points above its opening rate of 14.00% on Monday when the market closed on Thursday. The overnight market leaped as much as 1400 basis points above its opening rate of 6.00% on Monday to 20.00% when the market closed yesterday.
A $500 million 182-day Treasury Bill auction was held on Wednesday August 21, 2002, which was well received by the market. It returned an average yield of 13.77% and a high of 13.89% (see the table below). When compared to the previous auction for an instrument of similar tenor, held on July 24, 2002, there was a mere 0.8 basis point reduction in the average yield on the current issue. This indicated that the required rate of return on securities of this tenor was stable.
RESULTS OF TREASURY BILL AUCTION ON AUGUST 21, 2002
Instrument: GOJ Treasury Bill
Amount Applied for $1,021,108,100
Amount Allotted $500,000,000
Average Yield 13.77766%
Full Allotment
(price) 93.99260 - 93.52359
Full Allotment
(yield) 12.81783% - 13.88784%
Percentage Partial
Allotment 92.24620%
Partial Allotment (Price) 93.52068
Partial Allotment
(yield) 13.89451%
Secondary Market Yields on GOJ Fixed Rate Instruments
Tenor Bid Ask
(Years)
| 1.5 | | 14.90% | 14.65% |
| 3 | | 15.15% | 14.95% |
| 5 | 15.40% | 15.15% |
| 6 | | 15.65% | 15.40% |
| 9 | | 15.90% | 15.65% |
| 12 | | 16.15% | 15.90% |
In the coming week, approximately J$5.7 billion is expected to enter the system from COSH maturities and coupon payments on LRSs: VR 2003B, VR 2003/2004Q, FR 15.50% 2004, FR 18.125% 2004, VR 2001/2008 Tr. A,B,C,D, VR 2006C, FR 16.75% 2008, VR 2008/2009, FR 12% 2011, FR 14.25% 2013AC and FR 14.375% 2014AD. GCT payments are due next week, and an LRS auction is scheduled for next week Wednesday August 28, 2002, the details of which is not yet available. Outflows from these sources are not expected to affect liquidity conditions significantly.
US$ FIXED INCOME MARKET
The market for thirty-day paper showed a rare sign of liquidity this week, as higher repo rates lured institutions to invest funds sourced overseas. In response, 30-day secondary market rates declined from an average rate of 9.50% on Monday to 9.00% when the market closed yesterday. Again, the expectation is that conditions will relax as coupon payments enter the system within the next two weeks from now.
The prices of all GOJ Eurobonds continued to trade relatively stable. Over the past week the market has seen little activity either on the buying or selling side.
The market continued its upward trend for the fourth consecutive week, holding on to a net gain of 149.69 points or 0.38% from the 12.828,185 stock units traded with a market value of $116.12 million. Block transactions alone accounted for 30.2% of this amount. For the first two days of trading the main index gained 337.99 points or 0.87%. However, for the following two days, Wednesday and Thursday, the main index gave up 188.28 points or 0.48%. Only 74% or 28 of the listed stocks traded, with 9 advancing, 8 declining and 21 trading firm. The market closed on Thursday with total capitalisation increasing by $1.16 billion to $255.140 billion.
Bank of Nova Scotia, First Life Insurance, Carreras Group Limited were the top 3 stocks, in terms of total value traded, accounting for 12.85%, 11.60% and 10.37% of the total market value respectively. Carreras bolstered the index more than any other stock.
Courts (Ja.) Ltd advanced by 11.44% to lead the winners, while Montego Bay Freeport, Carreras and LOJ trailed at 8.33% and 7.69% respectively. On the flip-side, Goodyear declined by 7.41% to lead the losers, while First Life, Gleaner and Guardian Holdings trailed at 4.71% and 3.85% respectively.
In the coming week, the market is expected to trade relatively flat as it anticipates second-quarter results of companies whose weighting on the main index is significant. Furthermore, activity in the market will be tempered until the holiday season comes to an end.
FOREIGN EXCHANGE MARKET
The foreign exchange market opened the week at J$48.75:US$1.00 in the face of high demand and low liquidity. This prompted the Central Bank to intervene in the market for three consecutive days, at J$48.70:US$1.00 on Monday and J$48.68:US$1.00 on Tuesday and Wednesday. This allowed the local currency to trade at a price of J$48.73:US$1.00 on Wednesday, before succumbing to demand pressures on Thursday when the Central Bank was not present in the market. The local currency then traded as high as J$48.83:US$1.00 during the day, before returning its opening position for the week of J$48.75:US$1.00 when the market closed on Thursday.
FOREIGN EXCHANGE RATES
| Currency | Bid | Offer |
| US$ | 48.73 | 48.77 |
| CAD$ | 31.08 | 31.23 |
| GBP | 74.09 | 73.95 |
Term of the week:
EQUITY (STOCKS)
Stocks represent ownership in a company. The stockholder gains on his investment through the appreciation of the stock price, and through dividend payments. However, stock prices tend to be volatile, more so than bond prices, and, as such, are not recommended for short-term investments. Equities are ideal for long-term investments
