Understanding the Bank of Jamaica's Fixed Rate Certificate of Deposit
The Bank of Jamaica (BoJ) has announced the issuance of a Fixed Rate Certificate of Deposit (FRCD) with a competitive interest rate of 7.00% for a tenor of 28 days, set to attract significant investment interest. This financial instrument is part of the bank's strategy to manage liquidity in the market and provide investment opportunities for both public sector entities and private investors.
| ISSUER | BANK OF JAMAICA |
| AUCTION DATE | Wednesday, 2 October 2024 |
| OFFER VOLUME | JMD 12,000,000,000.00 JMD 11,400,000,000.00 allocated on Competitive basis JMD 600,000,000.00 allocated on Non-competitive |
| NON-COMPETITIVE BIDS | All bids from Public Sector Entities must be submitted as non-competitive bids. Bids allotted on a non-competitive basis will be settled at the weighted average price for the successfully allotted competitive bids. All bids from entities other than Public Sector entities must be submitted on a competitive basis. |
| ISSUE PRICE | To be determined through competitive bidding |
| ISSUE/SETTLEMENT DATE | 4 October 2024 |
| MATURITY DATE | 1 November 2024 |
| TENOR | 28 days |
| COUPON | Fixed at 7.00% per annum |
| INTEREST PAYMENT | At maturity on 1 November 2024 |
| TAXATION | Interest on this instrument is subject to the withholding of taxes. |
| APPLICATIONS | Applications will be received via the JamClear® Central Securities Depository [JamClear®-CSD] between the hours of 9:30am to 10:45am 2 October 2024. Settlement will be effected via accounts in the JamClear® Real-time Gross Settlement system [JamClear®-RTGS] at the Bank of Jamaica on 4 October 2024. |
| RESERVE YIELD | The allocation of bids may be subject to a reserve yield. Bids above the reserve price yield will not be eligible for allocation. |
| ENTITLEMENTS | Interest and principal payments will be effected through accounts housed in the JamClear® RTGS on the payment date. |
| REGISTRATION OF SECURITIES | Issued and registered in the JamClear®-CSD, which is the only legal registrar for the securities issued. |
| MINIMUM BID SIZE | The minimum value for applications is JMD One Hundred Thousand Dollars ($100,000.00). |
This table summarizes essential information regarding the FRCD, including offer volume, allocation details, issue and maturity dates, interest rate, and application process.
Source: Bank of Jamaica
Key Details of the Offering:
Auction Date: Scheduled for October 2, 2024, investors will have the opportunity to submit bids for a total offer volume of JMD 12 billion.
Allocation: The BoJ will allocate JMD 11.4 billion on a competitive basis and JMD 600 million on a non-competitive basis. Notably, all bids from public sector entities must be non-competitive, ensuring they receive allocations at the weighted average price of successful competitive bids.
Issue and Settlement Date: The issue date is set for October 4, 2024, with maturity occurring on November 1, 2024.
Investment Mechanism
Investors interested in this FRCD must apply via the JamClear® Central Securities Depository (CSD) during the specified application window on October 2, 2024. The settlement of the bids will occur through the JamClear® Real-time Gross Settlement system at the Bank of Jamaica. A minimum bid size of JMD 100,000 is required, making this investment accessible to a range of investors.
Tax Considerations
Investors should be aware that interest earned from this certificate is subject to withholding taxes, impacting the net return on their investment.
Implications for Investors
This fixed-rate instrument offers a reliable short-term investment option for individuals and institutions seeking a predictable return over a brief period. With a solid interest rate of 7.00% in the current economic environment, this offering is poised to attract significant attention from various sectors.
The structured approach to competitive and non-competitive bids also underscores the BoJ's commitment to transparent and fair allocation processes, particularly benefiting public sector participants while maintaining competitive market dynamics for private investors.
In summary, the Bank of Jamaica's Fixed Rate Certificate of Deposit presents a valuable opportunity for investors looking to secure a fixed return over a short duration, backed by the credibility of the national central bank. As the auction date approaches, stakeholders will be keenly monitoring participation and market responses to this offering.