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Finance Ministry floats new treasury bonds - BOJ cuts short-term rate

Published:Wednesday | February 10, 2010 | 12:00 AM

The Ministry of Finance has floated two new short term bonds on the market - with tenors of one and six months - which brokers say are comparable to the expected yields under the Jamaica Debt Exchange (JDX).

The 30-day treasury bond offer is priced at 10.50 per cent per annum, reflecting a 50 basis point or half a percentage point premium on the one-month open market rate offered by the Bank of Jamaica (BOJ).

The central bank cut its one month rate on Tuesday from 10.5 per cent to 10 per cent, a day before the GOJ offer opened, saying the adjustment was due to increased confidence that "IMF Board endorsement brings" - a reference to the February 4 approval of the 27-month stand-by agreement approved by the International Monetary Fund for Jamaica.

The other rates were unchanged.

The 180-day offer is priced at 11.25 per cent, which is 3.75 percentage points higher than the central bank rate, 1.25 points above the benchmark treasury bill rate, but in line with the six-month JDX bond.

The new treasury bonds will remain open to subscription for more than a week, from February 10-19.

The Ministry of Finance's offer document says the proceeds would fund budgetary requirements, but brokers also say the timing would allow investors an opportunity to re-invest the February 16 payouts of accrued interest on the old bonds surrendered under the JDX.

Pan Caribbean Financial Services has estimated the payouts at $25 billion, according to its newsletter to investors.

The new debt instruments mature on March 10 and August 10, and interest will be paid at maturity.

The bonds are taxable.