Nov 2009 Financial News

Liquidity stabilises; results in consistent bill rates

Nov 04, 2009

DURING the first three quarters of this year the local three-month treasury bill rate has hovered between 3.56 per cent and 3.96 per cent, a stability that has been attributed to the stable liquid conditions existing in the banking system.

According to the Central Bank of Barbados’ (CBB) review of the economy for the first nine months of the year, the average fluctuation in liquidity from one quarter to the other has significantly decreased during the year, moving from an average change of 1.3 percentage points in the first nine months of last year, to 0.6 of a percentage point this year.

As mentioned earlier, this decline in fluctuation, and hence improved stability, led to a more stable treasury bill rate, subsequent to it falling from 4.81 per cent at the end of last year.

The CBB stated that liquidity in the banking system, as measured by the liquid asset ratio, was estimated to have risen by 1.2 percentage points between December 2008 and September 2009. However, when compared to the similar period of 2008, this is representative of a reduction of 150 basis points.

Unlike the treasury bill rate, all other interest rates have fallen in line with the CBB’s reductions in the minimum deposit rate, which has been cut by a cumulative 150 basis points so far for the year, currently standing at 2.50 per cent.

This resulted in the prime lending rate ranging between 8.15 per cent and 9.2 per cent at the end of July 2009, when compared to a range of nine to 9.8 per cent at the end of last year.

A similar impact was also seen with the weighted average rate on total loans, which declined by 55 basis points over the same period to end at 9.70 per cent.
(RH)


Source:
Barbados Advocate
Wednesday November 4, 2009

http://www.barbadosadvocate.com/newsitem.asp?more=business&NewsID=7100