Policies and Procedures for direct Central Bank participation in the primary markets for government securities, where permitted, and in the secondary market.
The policy for the Bank of Jamaica's participation in Government of Jamaica securities is as follows:
Only Jamaica Dollar denominated securities are bought or sold.
The institution does not participate in offers where GOJ securities are
Participation in primary offers : this is done in open subscription offers (FIFO). Under Section 37 of the Bank of Jamaica Act, the Bank is permitted in any financial year to purchase or otherwise acquire, on a primary issue, securities issued or guaranteed by the Government of a nominal value up to forty (40) per cent of the estimated expenditure of the Government in that financial year. Current policy is that the Bank's participation is limited to reinvestment of maturing principal proceeds. The Bank reinvests in instruments that are on offer to the market at the time and therefore the terms to the Bank are identical to that offered to the market. To expedite the reinvestment, written communication is sent from the Central Bank to the Debt Management Unit (DMU), Ministry of Finance & Planning (MOFP) confirming the decision to reinvest and the terms of the market instrument The Head of the DMU signs in agreement and later issues the relevant certificate(s) to the Bank.
The conduct of secondary trades : the purchase of GOJ securities on the secondary market is primarily from commercial banks and primary dealers to assist these institutions when faced with Jamaica Dollar liquidity constraints. The transaction is always initiated by the institution that is in need of liquidity and the Bank prices the instrument at current market rates. Upon acceptance of the price by the institution, the deal is confirmed and the institution delivers the certificate(s) of the instrument being sold and supporting documents to the Central Bank. The Central Bank then credits the account of the institution held at the BOJ with the proceeds from the purchase.
GOJ securities held by the Central Bank may be sold as part of the Bank's monetary policy operations. The decision to sell securities is taken by the Operating Targets Committee. All BOJ primary dealers are contacted via telephone and are informed of the instrument being sold and the terms thereof. Upon confirmation of the deal, the primary dealer issues instruction to the Bank to debit their account at the BOJ as payment for the instrument. Acting on behalf of the primary dealer, the BOJ submits the relevant certificate and supporting documents to the DMU, MOFP to effect the transfer. After the transfer of the security has been effected, the DMU issues the certificate for the nominal amount sold by the BOJ to the primary dealer.
©2010 The Bank of Jamaica. All rights reserved