Jamaica Debt Problems Worsen: JPM

Jamaican bond yields are shooting up at a moment when the government is facing large maturities and a challenging external borrowing environment, says JPMorgan. The government auctioned JMD800m in 3- and 6-month treasury bonds this week at average yields of 15.21% and 16.96%, respectively, or 40bp and 161bp higher than its September auction. The average yields were 16bp and 161bp higher than those offered on comparable Bank of Jamaica CDs suggesting expectations of higher interest rates in the near term, says the shop. That 3-month treasuries were oversubscribed by 150% while the 6-month bills were undersubscribed by 1% indicate clear investor preference for shorter-dated bills. Rising yields in the domestic debt market are worrying, as they come at a time when the government has to increasingly rely on the domestic market for its financing needs. Jamaica faces a February 2009 maturity of a EUR200m 10.5% bond, and is also hammering out some $600m in loans from the IDB, which could add up to as much as $1bn over 5 years.