By Dennise Williams, Staff ReporterTHE money market continues to be flushed with cash as a number of investment instruments mature and brokers seek corresponding high yielding instruments to reinvest in. The first week of June saw $7.7 billion maturing from a variety of investment debentures and US$ index bonds. By the end of this week, $12 billion more will mature.
The question then becomes, where will the money go?
Industry experts say that besides the two fixed rate bonds that closed on June 7, there are Bank of Jamaica (BoJ) open market instruments, Government of Jamaica (GoJ) Global Bonds and, of course, the Jamaica Stock Exchange (JSE). In terms of the two fixed rate bonds that recently closed, brokers were mixed on its attractiveness. Series 'A' was a fixed rate bond maturing in 10 years and paying 17.125 per cent. Series 'B', the other fixed rate bond, paid 17 per cent and matures in 2014. However, while acknowledging that the lowering of interest rates is good for the country, brokers seem to be balking at rates that trend below 17 per cent. Clay Moodie, manager of the unit trust department of Dehring Bunting and Golding, stated, "I don't think the traders are totally enamoured with what is going on. Right now, there is a heavy demand for short-term high yielding funds. The last local registered stock (LRS) auction is an indication of where the market is looking to buy. While the coupon rate was in the 15 per cent region, the yields were over 17 per cent."
The BoJ website revealed the following average yield results of the auction on May 27.
FR LRS 2006 AJ May 31, 2006 17.25 per cent
FR LRS 2007 AJ Nov 30, 2007 17.45 per cent
FR LRS 2009 May 31, 2009 17.26 per cent
So in regards to the two fixed rate bonds, Mr. Moodie states, "Personally, I think that the market is not willing to lock down for that rate. I think uptake will be low." Sonia Owen, investment manager of Barita Investments, feels differently. "I think that the bonds are a pretty good buy right now. A handful of people I know have invested in it because rates are coming down."
As to the alternative investment options, namely the JSE, Mr. Moodie states, "The JSE has been doing well because the market sees that rates will be low." Ms. Owen states, "I think that the liquidity has flowed into the JSE."
Still some investors feel the need to convert to hard currency for investment opportunities. Ms. Owen explains. "The money coming from the US$ index bonds had started out as hard currency. People prefer to convert back into U.S. dollars or a similar investment product."
Overall, Mr. Moodie describes the mood of the market this way, "The market is liquid with U.S. dollars and Jamaican dollars, but people are not worried. Investors are sitting on the sidelines and waiting to see what will happen next."
