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The Bank of Jamaica building.

The Treasury Bill auction on Wednesday had performed to market expectations, yielding 14.22 per cent on the six-month issue.

The three-month bill yielded 13.93 per cent.

The auction was also massively oversubscribed: seven fold in the case of the six-month and near three fold for the shorter tenor.

The Bank of Jamaica, which handles the monthly auctions on behalf of the Government of Jamaica, offered $200 million in six-month bills to the market, but got bids totalling a near $1.43 billion; another $400 million of three-month bills attracted almost $1.2 billion of subscriptions.

The yield on the six month bill was almost a point higher than January's 13.24 per cent rate, but tracked the price at which the BoJ is currently issuing its open market instruments of similar tenor.

Government had initially suspended the six-month auction, fearing these same results and the consequent increase in its debt servicing costs the higher yield implies - but retreated after dealers formally voiced objections.

The outcome of the auction means that the finance ministry will be paying out returns at almost a point higher on some $54 billion of coupons that become due over the next month.

The next T-bill auction will be held March 26.

sabrina.gordon@gleanerjm.com

SOURCE: Financial Gleaner, Friday, February 29, 2008.