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Financial News

May 2013 Financial News

Interest rates are on the rise (Jamaica)

May 24, 2013

KINGSTON, Jamaica - Interest rates have been on the rise since the last Government debt swap.

Average yields for treasury bills have increased by 0.54-1.12 percentage points since February, when new rates were set at between 5.25 per cent and 5.75 per cent, depending on maturity dates.

The 91-day instrument, which experience the highest increase over the three months, stood at 6.62 per cent on Tuesday, even though the rates on all treasury bill tenors remained below the two-year high reached at the beginning at 2013.

The rates, which are used as a guide to setting interest rates on bank loans and savings rates, were relatively stable between April and October last year.

They ranged from 6.2 per cent to 6.7 per cent during that period, depending on the length of maturity - the yields were higher for longer-term instruments.

However, investors started to lose interest in the longer-term treasury bills at the lower rates in November, when the market started taking up less than the amount hoped to be raised by the Government.

For instance, the Government typically offers $400 million to the market, but only $325 million was taken up on the six-month instrument in November. Similarly, only $242 million of the total amount offered was taken up in December.

Consequently, the average yield rose from 6.69 per cent in October to 7.47 per cent in January.

The rise in yields on three-month treasury bills rose even higher moving on average from 6.38 per cent in October to 7.67 per cent in December before falling again to 7.32 per cent in January.

The yield on 28-day instruments was more stable, rising from 6.21 per cent in October to 6.34 per cent in January.

Since being reset in February at 5.25 per cent in February, when the National Debt Exchange (NDX) shaved an average of two percentage points off interest rates on $860 billion of government's domestic debt, the average yield on the one-month treasury bill rose by 0.54 per cent.

Similarly, the 180-day equivalent rose by 0.69 per cent over the last three months.

On the same side of the coin, interest rates for 30-day instruments in the private money market have risen from 5.7 per cent, where it fell to at the end of February following the debt swap, to 6.4 per cent on Monday.


Source:
Jamaica Observer
Friday May 24, 2013

http://www.jamaicaobserver.com/business/Interest-rates-are-on-the-rise_14323268#ixzz2UDzzSoKQ