Traders Desk

For this week, there was no B-FXITT intervention from the Bank of Jamaica (BOJ). This week saw lower demand for USD with the anticipation for this to continue for the remainder of the year. For the week commencing December 19, 2022, we should see the appreciation of the local currency as the Christmas holidays are just days ahead and demand continues to ease for USD as transactions wrap up. Week over week, USD demand was comparatively slow with the anticipation that this will continue for the remainder of the year.<br> The JMD appreciated against the USD resulting in a 0.38% decline in the exchange rate. This was due to the reduced volumes traded for the USD over the latter part of the week. The bond market remained flat for the former part of this week but saw a sell-off in line with other risk-assets for the last two days. This was in conjunction with the Fed’s 50 basis point hike in the policy rate to the 4.25% - 4.50% range and the core and headline Consumer Price Index (CPI) results of 6% and 7.1% respectively for November. This is firmly above the Federal Reserve’s target of 2%. Week over week, the JAMAN bonds experienced little to no price change. Bond prices were flat week over week for the JAMAN 36 bond while the other tenures saw prices sliding marginally to up to 0.63% as the largest decline. The expectation is that volatility could remain strong going into 2023 as negative surprises continue to show up in major indicators, which suggests investors were too optimistic around inflation and interest rates for much of 2022. These themes should continue to dominate 2023, even if they moderate. For the upcoming week, we expect the releases of the consumer confidence index, core personal consumption expenditure index and Q3 real GDP revision. We expect consumer confidence to continue to weaken as inflation takes a bite out of savings, and for this to weigh further on investor sentiment and earnings by extension. Week over week, the JMD market showed modest liquidity given a greater demand for shorter term JMD funds while longer term funds declined. Overnight rates inched up on the lower end to a range of 7.80% -8.25% relative to last week while 30-day rates closed the similar period between 8.50% - 8.65%. Interest rates on longer tenures continued the downward trend ranging on both lower and upper limits, ie. from 8.65% - 8.85% when compared to the prior week.&nbsp; The BOJ 7.50% Fixed Rate 30-day Certificate of Deposit auction for the allocation of J$21B was oversubscribed, with total value received amounting to J$26B. The average yield for successful bids was 9.39%, with highest submitted bid rate of 11.5% and lowest of 7.71%.&nbsp; The USD market was relatively liquid with some tightening in the latter part of the week, on the back of unchanged rates week over week. For shorter tenures (30 -day) rates were within the range of 3.75% - 4.25% and longer tenures rates fell between 3.85% - 4.40%.&nbsp; For the week starting December 19, 2022, the expectation is that liquidity will moderate for both the JMD &amp; USD markets.

The FX market continued to show moderate liquidity week over week with a slight depreciation of $J (0.05%) 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. Week over week, USD demand was comparatively slow with the anticipation that this will continue for the remainder of the year. We also expect the market to remain quiet for the remainder of the year with the disruptions expected based on long weekends around the holiday season.<br> For the week beginning December 12, 2022, we expect the JMD to lose momentum as businesses focus on setting payroll and bonus payments. For this week we continued to see a rally in prices of risk assets including the emerging market bonds following the release of the job market results in the prior week. Results printed stronger than expected. Shorter dated bond prices remained relatively flat for the week with the exception of longer dated bonds. Bond prices saw increases of 1.50% and 3.15% for JAMAN 45 and JAMAN 39 respectively, while the 25’s and 36 on average remained stable week over week. With the anticipation of a softer policy rate hike this week from the U.S Fed, we expect prices to continue on their upward trend barring any deviation from expectations. Following the CPI information that was released early this week, with consumer price index coming out just 0.1% higher than the previous month, we expect to see a boost in the market as the economy begins to loosen up. Interest rates on the short term overnight rates (&lt; 30 days) remain on a downward trend with a range of 7.5% - 8.25% on the lower end, a slight downtick compared to the previous week. The JMD market showed a slight increase in liquidity for the period. The market saw a reduction in demand for JMD for shorter term funds while the longer term funds remained stable. The rates on longer tenures decreased slightly ranging from 8.75% - 8.90%. The BOJ 7.50% Fixed Rate 30-day Certificate of Deposit auction for the allocation of J$19.5B was oversubscribed, with total value received amounting to J$25.4B. The average yield for successful bids was 9.08%, with highest submitted bid rate of 12.00% and lowest of 7.75%. Week over week, USD rates remained relatively flat with sufficient liquidity with rates ranging between 3.75% - 4.25% for shorter tenures with longer tenures seeing rates between 3.85% - 4.40%. For the week starting December 12, 2022, the expectation is that both the JMD &amp; USD liquidity will remain moderate while the market awaits information surrounding the FED decision this week.

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<br> 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.&nbsp; 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. &nbsp;in demand for shorter term funds. There was a slight downtick in short term (&lt;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 (&lt;30 days). For the week starting December 5, 2022, the expectation is that both JMD &amp; USD liquidity will remain moderate with the expectation that the USD supply will slightly diminish with the current focus surrounding holiday shopping.

Week over week the FX market had ample liquidity available 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.<br> However, there was a recent mass selling of USD from a major market player which contributed to the marginal depreciation of JMD against USD by 0.24% to close the week selling at J$155.04.<br> As we near the upcoming Christmas holiday season, the demand for USD should continue to rise to buy more imported goods.<br> For the week starting November 25, 2022, we expect the JMD demand to weaken in favour of USD in anticipation of seasonal increase consumer spending.<br> This week was short for the bond market with low activity mainly attributable to the largest market players being on holiday for the latter part of the week. As such, bond prices remained relatively flat coming off a rally caused by a miss in CPI expectation in the weeks prior. However, the longer dated JAMAN45 bond prices saw increases of 2.51% while the 25’s and 36 on average remained stable with marginal declines week over week. To close the month of November 2022, another short week in which we expect the bond market to continue a stable trend in either direction. The Fed Chair speech on Wednesday November 30th and U.S. unemployment rate data on Friday December 2nd could move the market to the upside if the signals are less pessimistic than the consensus estimate. The JMD market saw a marginal amount of tightening, however remained largely liquid. This was evident in the slight decline in the number of brokers doing placements versus borrowing. Due to this, short term (&lt;30days) overnight rates trended up to a maximum of 8.50% when compared to the prior week of 8.00%. While the longer tenure rates edged up by approximately 25bps between 8.50%-8.75%. The BOJ 7% Fixed Rate 30-day Certificate of Deposit auction for the allocation of J$15B was oversubscribed, with total value received amounting to J$22.5B. The average yield for successful bids was 8.47%, with highest submitted bid rate of 11.98% and lowest of 7.50% Week over week, USD rates remained relatively flat with sufficient liquidity as the recent market behaviour lags. For the week starting November 25, 2022, the expectation is that JMD liquidity will remain moderate and USD supply may be dried up due to increase consumer spending following holiday deals.