Week over week the FX market showed moderate liquidity available with a slight appreciation of the $J (-0.34%) to satisfy the requests for end-users and institutional clients

There was no B-FXITT intervention from the Bank of Jamaica (BOJ) for this week.

As we near the upcoming Christmas holiday season, the demand for USD should continue to rise to buy more imported goods but is expected to taper off as we get closer to the end of the month.

For the week starting December 5, 2022, we expect the JMD demand to weaken in favour of USD in anticipation of seasonal boost in importation of consumer goods. 

Last week saw a rally in the prices of risk assets including the emerging market bonds as jobs market results came out stronger than expected and the Fed signalling the possibility of smaller rate hikes in 2023.

Shorter dated bond prices were flat for the week while longer dated bonds posted week over week growth.

JAMAN 2039 and JAMAN 2045 bond prices saw increases of 3.03% and 4.00% respectively, while the 25’s and 36’s on average remained stable week over week.

As investors expect sluggish economic conditions in 2023, they are moving out further on the bond curve, a trend which explains the current yield curve inversion of the 10Y to 2Y portion of the US government bond yield curve.

The market could continue its recovery this week if Initial Jobless Claims falls below the market expectation of 1.6M claims on December 8th and if preliminary consumer sentiment estimates on December 9th come out above the market expectation of 56.9. We however believe that both these readings could be a negative surprise given that the labour market has been shedding jobs in the last two months and given that consumer sentiment has been somewhat impaired by inflation in the same time frame.

 in demand for shorter term funds.

There was a slight downtick in short term (<30days) overnight rates which trended up to a maximum of 8.4% when compared to the prior week of 8.5%.

While the longer tenure rates edged up to a range of 8.95%-9.25%.

The BOJ 7.50% Fixed Rate 30-day Certificate of Deposit auction for the allocation of J$20.5B was oversubscribed, with total value received amounting to J$25.9B. The average yield for successful bids was 8.94%, with highest submitted bid rate of 11.25% and lowest of 7.50%.

Week over week, USD rates also remained sufficient liquid as the recent market behaviour lags with rates ranging between 3.75% - 4.25% in the short term (<30 days).

For the week starting December 5, 2022, the expectation is that both JMD & USD liquidity will remain moderate with the expectation that the USD supply will slightly diminish with the current focus surrounding holiday shopping.