Heavy demand for two new Treasury Bills auctioned Monday saw a drop in yield on price, signaling that Jamaican investors are still willing to be led by the central bank towards lower interest rates.

The downward pressure on rates will ease debt servicing costs for the treasury, whose stock of variable rate debt now eclipses fixed rate issues by more than $100 billion.

The Bank of Jamaica got combined bids of $3 billion for its $400 million and $500 million T-Bills, which it will issue to investors today.

The demand pushed the yield below 12 per cent for both instruments: the 3-month bill yielded 11.79 per cent, while the 6-month yielded 11.99 per cent.

A year ago, the yield was 14.4 per cent on a six-month bill issued January 2006, representing 1.3 point or nine per cent reduction.

Boon to treasury

The lower yields are a boon to the treasury whose variable rate instruments are priced relative to the 6-month T-Bill.

In November, for example, the domestic debt pool was skewed heavily to VR securities, amounting to $322.9 billion or 60 per cent of the $539.9 billion of the locally issued debt stock.

The total national debt is about $900 billion, some $4.2 billion of which are outstanding T-Bills.

The next monthly auction is scheduled for February 20.

business@gleanerjm.com