BOJ to pump money into economy via debt buy-back

The Bank of Jamaica’s headquarters along Nethersole Place, downtown Kingston.

The Bank of Jamaica (BOJ) has announced a plan to purchase GOJ fixed rate and variable rate instruments and redeem BOJ instruments early, effective Thursday, March 19.

The offer will end of Tuesday, June 30.

In 2019, the Government of Jamaica bought back three of its US debt instruments, but that was to save on interest rates. The current project seems intended to increase liquidity in an economy affected by the spreading coronavirus disease.

The total budget for the current operation was not shared, but the central bank said registered holders of these instruments may make an offer to the BOJ to participate in the operation.

The notice on the BOJ’s website said the offer must indicate the name of the instrument, the ISIN, the nominal amount for consideration, and the value and settlement dates.

These offers should be submitted via electronic mail between the hours of 9:00am and 1:00pm each day with the title “Bank of Jamaica Securities Operation” and sent to email address BOJ.MarketOperations@boj.org.jm.

The central bank outlined that the arrangement will be in place until 30 June 2020 subject to review.

As to the pricing methodology, the bank said BOJ instruments will be priced at par. USD Indexed Notes will be converted to JMD using the BOJ 10-day moving average selling rate applicable on the settlement date.

Meanwhile the price on GOJ VR securities will be determined by using a yield to next repricing. This yield is calculated using the applicable 6-month WATBY on the value date to define an equivalent yield for the period to next repricing.

The price on GOJ FR securities is determined using a yield to maturity. This yield will be determined using the average bids of all indicative or actual secondary quotes received on Bloomberg for the respective instruments on value date, the central bank outlined.