JIS News

Senior Director in the Debt Management Unit of the Ministry of Finance and the Public Service, Pamella McLaren, has said that pension funds and insurance companies should be receptive to the new Jamaica Debt Exchange initiative.
“I expect the pension funds and insurance companies, in particular, will be very receptive to these new bonds. You spoke we listened,” she declared at the launch of the JDX at the Bank of Jamaica (BoJ) auditorium on Thursday (January 14).
“We have priced all the new instruments on a curve, starting with the short end being priced off the prevailing Bank of Jamaica (BOJ) one month rate of 10.5 per cent, with longer instruments at higher rates,” she said.
“You’ll have a choice as to which new bonds you subscribe to in the exchange, however we will apply rules to ensure that maturity is extended and that the proportion of fixed rate bonds in the portfolio is increased” she added.
Mrs. McLaren noted that all bonds will be required to be exchanged for longer dated maturities, in most cases, including an extension of at least two years. Fixed rate bonds can only be exchanged for new fixed rate bonds, with coupons ranging from 11 per cent to 13.25 per cent and tenures from three months to 30 years. US dollar denominated and US indexed bonds can only be exchanged for new US dollar denominated bonds.
In the US component of the portfolio, she said that there will be a choice of three bonds ranging from 6.75 per cent for three year tenures, seven per cent for four year tenures and 7.25 per cent for seven year paper. Currently there are US dollar indexed instruments in the portfolio, however these will not be offered in the exchange.
She pointed out that the Government is offering two CPI index bonds – a 12-year, at two per cent real rate with a step up to four per cent over four years, and a 20-year at two per cent for two years with a step up of 4.25 per cent after four years.
Mrs. McLaren further said with the new instruments the Government will be limiting the amount in the portfolio just to test to see how they perform and the risks associated.
Pricing for new bonds under the JDX will be in the range of 12-13 per cent, for the Jamaican dollar component, and around seven per cent for the US dollar component. The CPI index bonds start at two per cent and step up as high as four and a quarter of real return, she said.

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