The one-year instrument was being sold at 22.67 per cent at its exit, down from 24 per cent in April when the BoJ adjusted rates on that tenor alone.

"It is the normal practice for central banks to conduct its liquidity management operations at the short end of the yield curve. That is between overnight and 180 days," said the BOJ, when asked why the instrument was pulled.

"The temporary use of longer tenors such as the one-year becomes necessary in an environment of excess liquidity. It is the BOJ's view that at this time, the liquidity levels can be effectively managed with the usual shorter-term instruments." The move comes as treasury yields are falling.

The 182-day treasury is now yielding 21.08 per cent on the May auction, compared to 21.5 per cent on the 180-day CD sold to primary dealers by the BOJ.

Analysts see the pulling of the one-year CD as something of a return to confidence, with the relative stability of the exchange rate which appears to have normalised around J$89:USD; and as a sign that interest rates on JMD securities are expected to continue falling.

Pan Caribbean Financial Services' Business Eye, its newsletter to clients, said investors should consider gravitating "towards fixed rate instruments in anticipation of lower yields on GOJ instruments."

business@gleanerjm.com

Rates on BOJ tenors

Number Per cent of days (%)

30 17.00

60 17.50

90 20.00

120 20.20

180 21.50