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The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

Central Bank fixed rate now at a “high” one per cent for 30 day deposits by financial institutions

The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

The Bank of Jamaica (BOJ), the island’s central bank, announced that 50 bids came in from financial institutions for J$22.7 billion to be placed on the BOJ certificate of deposit for the next 30 days.

The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

It must be noted that the BOJ bids are limited to licensed financial institutions, otherwise called security dealers, and not the general public.

The BOJ only accepted bids that came in at one per cent.

Given the demand for BOJ fixed deposits by financial institutions, the next auction is scheduled for Wednesday, December 11.

“The oversubscription means that there is a lot of Jamaican dollars bidding that suggests that interest rates should be trending down. The market does not have a lot of short-term Jamaican dollar instruments to put money in safety.”

– Chief operations officer, Dino Hinds at Capital Solutions

Dino Hinds, chief operations officer at licensed security dealer, Capital Solutions explained that the investment community has cash that needs a short-term home, even with the low interest rate offered. “The oversubscription means that there is a lot of Jamaican dollars bidding that suggests that interest rates should be trending down. The market does not have a lot of short-term Jamaican dollar instruments to put money in safety. So the only other option is a Treasury Bill offered by the BOJ. So you are really forced to put short-term money in the BOJ fixed rate instruments.”

Generally speaking, the financial managers must ensure that their money remains liquid so that they can meet their 30-day, 60-day and 90-day obligations and Hinds explains that there are no real safe options that pays interest at a rate higher than commercial banks, other than the BOJ.