SEVERAL primary dealers have adjusted their policies in recent times to allow for investors to participate in Bank of Jamaica’s 30-day certificate of deposit (CD) instrument, under the new $100,000 Jamaican-dollar (JMD) minimum.

The BOJ had changed the minimum bid size for its CD auctions from $1 million to $100,000 effective May 22, as it sought to align its auctions with best practice and improve financial inclusion for smaller investors. While there was some level of resistance by some primary dealers to change the minimum amount, checks by Jamaica Observer revealed that most primary dealers have cut their CD minimum. The BOJ’s 30-day CD auctions take place every Wednesday.

“The reduction in the minimum bid size is aimed at fostering greater financial inclusion and aligning the bank’s auction with the industry norm. In that regard the bank expects all primary dealers, who have not yet done so, to adjust their minimum requirements accordingly, thereby enabling a broader range of investors — including those with smaller net worth — to access the investment opportunity,” stated a June 19 BOJ news release seen by Business Observer.

Any investor can access a BOJ CD by contacting a designated primary dealer such as Barita Investments Limited, Jamaica Money Market Brokers Limited (JMMB Investments), JN Fund Managers Limited, Mayberry Investments Limited, NCB Capital Markets Limited, Sagicor Investments Jamaica Limited, or Scotia Investments Jamaica Limited. Although some primary dealers charge fees to place the bids, some don’t charge any fees at all to their clients. The process is relatively simple, with any interested investor needing to set up and indemnity with any primary dealer and ensuring that an account at JamClear® Central Securities Depository (CSD) — the depository for all BOJ and Government of Jamaica (GOJ) instruments — is created in their name.

The client tells the advisor or agent what yield they want to bid on the CD and then wait to be informed if they were successful in the auction. The dealer would place the bid on their behalf and would follow the instructions of the investor to either ‘roll’ the CD along with the interest into the next auction or to disburse the funds back to the investor’s settlement account. Anyone from the general public can also contact BOJ for an explanation of how interest is calculated, or pose any other general query they may have about a CD.

Primary dealers participated in an average $91.7 billion of BOJ open market operations (OMO) during 2023, a 74 per cent increase over the $52.7 billion in 2022.

The June 19 auction saw $44.69 billion in 418 total bids received for the auction which had $40.50 billion on offer. A total of 398 bids were successfully allocated with an average yield of 9.75 per cent and bids ranging from 8.999 – 12.00 per cent which included a $15-million bid, a 10.399 per cent yield being the highest to receive full allocation. These CDs mature on July 19.

BOJ is set to have another auction today during which $53 billion in 30-day CDs will be on offer, split between $50.35 billion to be allocated on a competitive basis and $2.65 billion to be allocated on a non-competitive basis. This CD will mature on July 26, with the annualised coupon set at 7.50 per cent.