SECONDARY MARKET rates fell this week amid inflows of J$5.3 billion from COSH maturities and LRS coupon payments. The market for thirty-day paper opened at 14.00% on Monday, but shed 15 basis points on Wednesday to close at 13.85%. Overnight rates also retreated on Wednesday to a band of 6.00% - 8.00% from Monday's opening band of 10.00% - 12.00%.
The main event of the week was the J$800 million LRS auction held on Wednesday August 28, 2002. It comprised 7-year and 30-year instruments with coupon rates of 14.25% and 15.00% respectively. The 30-year LRS drew attention, as it had the longest tenor of any LRS previously issued by the Government of Jamaica. It returned an average yield of 16.90% and a high of 18.22%. The 7-year LRS, which is not a stranger to the market, returned an average yield of 16.16%. The Government paid 26 basis points more on the current 7-year LRS, when we compared the previous auction for an instrument of similar tenor held on July 30, 2002. (See the table below for a summary of the results of the auction)
Secondary Market Yields on GOJ Fixed Rate Instruments
Tenor
| (Years) | | Bid | Ask |
| 1.5 | 14.90% | 14.65% |
| | | 3 | 15.25% | 15.00% |
| | | 5 | 15.55% | 15.30% |
| | | 6 | 15.75% | 15.50% |
| | | 7 | 16.00% | 15.75% |
| | | 9 | 16.15% | 16.00% |
| | 12 | 16.30% | 16.00% |
| | 15 | 16.45% | 16.25% |
In the coming week, approximately J$700 million is expected to enter the system from coupon payments on LRSs: 2003A, 2003/2004M, 2004S, 2004C, 2004J, 2005G, 2009, 2009C, 2010AA, 2012AA. Inflows are also expected from COSH maturities. An LRS auction is scheduled for next week Wednesday, the details of which are not yet available. US$ Fixed Income Market Secondary market rates edged up slightly as the US$ fixed income market continued to languish with low liquidity. The market for thirty-day paper traded as much as 25 basis points above Monday's opening rate of 9.00% up to Thursday. Similarly, 90 and 180-day papers traded 25 basis points above Monday's average opening rate of 9.25% during the week. Eurobond prices remained stable this week.
In the coming week, the Government of Jamaica is expected to pay out approximately US$16.9 million in coupon payments on GOJ Eurobond 2007 and GOJ 11.75% Promissory Note 2003. GOJ Eurobond 2007 accounts for approximately 80% of this amount, which means that the effect on the market's liquidity will depend on the amount that is held by the local market. If it is significant, the pressure in the market could ease next week.
EQUITY MARKET
Week to Date Performance of the JSE Market Indices (See table below)
The JSE Index rose by 225.20 points or 0.58% this week, reaching 39,365.93 when the market closed on Thursday. After sprinting out the block for the first two days of trading, the market lost momentum and shed 140.87 points on Wednesday. This was primarily attributed to institutional investors staying on the sidelines as they anticipated the results of Wednesday's GOJ LRS auction. The market closed on Thursday with total capitalization increasing by $1.325 billion to $255.825billion.
A total of 19,314,128 stock units traded, valued at $172,382,639.39. Only 34 or 89.47% of the total listed stocks were traded, with 15 advancing, 12 declining and 11 trading firm.
The conglomerate companies dominated trading, accounting for 67.85% of the total value of all transactions. Grace Kennedy & Co. Ltd. dominated this group, accounting for 54.87% of the total value. Meanwhile, Desnoes & Geddes' 6.38% price appreciation helped the main index more than any other stock.
Grace Kennedy & Co., Bank of Nova Scotia and Jamaica Broiler Group were the top 3 stocks, in terms of total value traded - accounting for 54.87%, 6.03% and 4.95% of the total market value respectively. Ciboney Group advanced by 50.00% to lead the winners, while Pegasus Hotels and Hardware & Lumber trailed at 24.00% and 10.00% respectively. Meanwhile, Life of Jamaica Ltd. declined by 12.50% to lead the losers, while Carib Cement and Goodyear, lagged behind at 11.67% and 5.00%.
In the coming week, the level of activity in the market is not expected to change significantly with another week or two to go before the summer holiday comes to an end.
FOREIGN EXCHANGE MARKET
The local currency lost ground against its US counterpart this week as the foreign exchange market pined with low liquidity. After opening on Monday at J$48.88:US$1.00, the local currency came under pressure immediately. As a replay of the previous week, the Central Bank was prompted to intervene for three consecutive days - at J$48.77:US$1.00 on Tuesday and Wednesday, and US$48.85:US$1.00 on Thursday. Nevertheless, end-user demand helped the local currency to skip past the J$48.90 mark on Wednesday to hit a high of J$48.98:US$1.00 on Thursday. The local currency barely managed to keep under J$49.00:US$1.00 when the market closed on Thursday. Foreign
EXCHANGE RATES AS AT 29/08/2002
Currency Bid Offer
US$ 48.92 48.97
CAD$ 31.26 31.40
GBP 74.68 73.82
