The Bank of Jamaica (BOJ) has ramped up its offerings of longer-term certificate of deposits (CDs) and has offered to the market this week three new US dollar instruments with tenors of three, five and seven years all for an unlimited amount. It is also offering two one–year Jamaican-dollar issues of $1 billion each.

In its last quarterly monetary policy report, the bank noted that appetite for such longer-term issues was on the rise. The latest offer appears aimed to satisfy this and also to reduce pressure on the Jamaican dollar which increased somewhat after NDX payments in February.

The Jamaican dollar which opened the year on the first trading day of January 4 at $120.37 to one US dollar was priced at $122.02 to one US dollar on April 13, a change of less than two dollars supported by BOJ interventions.

Following the payment of $62 billion in NDX payments in February, as noted by BOJ governor Bryan Wynter, investment funds that were not taken up by the government sought short-term protection from uncertainty by seeking US dollars in the days that followed.

As Wynter outlined, the BOJ met the resulting excess foreign exchange demand with sales of US dollars and by issuing US dollar-indexed one-year certificates of deposit.

Increased appetite for longer-term instruments was signalled during the December 2015 quarter, when as reported in the quarterly monetary policy report (QMPR) the bank was able to offer longer-dated CDs at lower coupons ranging between 20 to 25 basis ponts (bps).

“In spite of the lower coupons, there were increased placements on the two-, three- and seven-year instruments, which were significantly higher than the previous quarter,” the report notes.

The two new Jamaican-dollar issues in the amount of $1 billion each and of 365-day tenor are being offered at 5.80 or 55 bps above the benchmark 30-day CD rate to bidders.

The BOJ has set April 19 as the cut-off date for applications for the Jamaican-dollar issue as well as the three new US dollar issues ranging in tenor from three, five and seven years.

Bidders can apply for an unlimited amount of USD-CD 2019 which offers a fixed coupon of 2.20 per cent per annum, 1.30 percentage points above the current rate of 0.90 per cent on three-year US Treasury. The coupon is set for payment semi-annually.

The BOJ is offering on the US dollar five-year instrument – BOJ FR USD-CD 2021H — a fixed coupon rate of 3.10 per cent per annum, which is 1.88 percentage points above the current rate of 1.22 per cent on five-year US Treasury. The coupon is also set for payment semi-annually.

The final offer made this week is for a seven-year CD – BOJ FR USD-CD 2023A – also for unlimited amount – for a fixed coupon of 3.75 per cent per annum, which is 2.21 percentage points above the current rate of 1.54 per cent on seven-year US Treasury. That coupon is also to be paid semi-annually.