The Federal Reserve’s stash of assets shrank this week for the first time since February, reflecting a sharp drop in currency swaps with foreign central banks and a continued slackening in demand for other emergency credit facilities.
The size of the Fed’s balance sheet - composed of assets ranging from U.S. Treasury bonds and mortgage-backed securities to loans to banks and state governments - fell to $7.14 trillion on June 17 from $7.22 trillion a week earlier.
Bank of Jamaica announced that, effective 1 July 2020, the limit on the foreign currency net (FXNOP) of authorised dealers will be as follows: the limit will remain at 25% of regulatory capital denominated in Jamaica Dollars, for short positions. As it relates to long positions, the limit will be reduced by 10 percentage points to 15% of regulatory capital denominated in Jamaica Dollars.
The FXNOP limit is calibrated to ensure adequate levels of liquidity in the foreign currency market. The decision to adjust the limit is based on the prevailing market conditions as well as Bank of Jamaica’s commitment to conducting periodic reviews of the limit since its introduction in 2018. All other guidelines relating to the FXNOP limit remain unchanged.
The Bank will continue to monitor the implications of financial market developments and will appropriately adjust FXNOP limits in accordance with the Bank’s objective of maintaining financial system stability.
For the year ended February 29, 2020, Portland JSX Limited (PJX) reported audited net profits of US$1.35Mn (EPS:US0.43¢), a two-fold increase relative to the $1.32Mn (EPS: -US0.43¢) loss reported in 2019.
The main driver of this performance was a US$2.31Mn net fair value gain on financial investments reported for the year, which was up from the US$665k loss reported in 2019.
PJX’s stock has risen 9.7%% since the start of the year and closed trading at $7.90 on Wednesday. The stock currently trades at a P/E of 13.8x, which is in line with the Main Market Financial sector average of 13.8x
The Government of Belize asked on Wednesday for a six-month moratorium on interest payments tied to its US dollar-denominated 2034 sovereign bond, citing the COVID-19 pandemic for wreaking a "devastating" effect on its tourism-led economy.
In recent years, Belize's tourism industry accounted for approximately 60% of the country's foreign exchange earnings; however tourism has collapsed due to the rapid deterioration of worldwide economic conditions and the lockdown measures imposed by many countries, including Belize, to slow the spread of COVID-19.
Belize has restructured its debt three times in the last decade, having come to an agreement with creditors the last time just over three years ago. The government said it would be discussing the financial situation with its creditors over the next two weeks and a formal "Consent Solicitation for temporary capitalization of interest is expected to be launched in early July."
Brazil on Wednesday came out in support of the United States' candidate to lead the Inter-American Development Bank (IDB), putting the intended nominee, Mauricio Claver-Carone, in a strong position to take over the region's largest lending institution and only its fifth president since its founding in 1959.
Claver-Carone is the the senior director for Western Hemisphere affairs at the US National Security Council and leads the US government's América Crece program to promote private-sector investments in energy and infrastructure projects in Latin America and the Caribbean.
Claver-Carone's nomination was seconded by Ecuador. Brazil had been expected to put forth its own candidate. Argentina and Paraguay were also mulling nominees of their own. The US government owns 30% of IDB's shares, while Brazil has 11.4% and Ecuador has 0.61%. Argentina, meanwhile, has 11.4%, followed by Mexico with 7.3%.
The Bank of England on Thursday added another £100 billion to its quantitative easing program in a bid to shore up the U.K. economy amid the fallout from the coronavirus crisis.
The additional bond purchases will take the total value of the central bank’s Asset Purchase Facility (APF) to £745 billion.
The Bank resisted taking interest rates into negative territory, a decision being closely watched by investors, instead opting to hold its main lending rate steady at 0.1%. Rates have been reduced twice from 0.75% since the beginning of the coronavirus pandemic.
The International Energy Agency said that it expects the fall in oil demand this year to be the largest in history, but believes there are signs the market could reach “a more stable footing” over the coming months.
Oil prices have tumbled around 40% year-to-date, as lockdown measures designed to slow the spread of the coronavirus created an unparalleled demand shock in energy markets.
The IEA said oil demand in the second quarter, which saw the greatest impact from lockdown measures, was 17.8 million barrels per day lower when compared to the same period last year. That level of demand reduction was slightly less than the group had previously expected, although still unprecedented.
According to Fitch, Jamaica’s fiscal balance will decline to -2.6% of GDP in FY2020/21, down from 0.9% in FY2019/20 (April 2019 – March 2020), as contracting economic activity weighs on revenues and spurs the government to increase expenditures. If this materializes, it will be Jamaica’s largest fiscal deficit since FY2012/13.
Fitch forecasts real GDP for Jamaica will contract by 5.1% y-o-y in 2020 as the coronavirus pandemic severely undercuts export demand and private consumption. The recession will undermine income tax and the General Consumption Tax (GCT) receipts, which accounted for an estimated 28.0% and 35.2% of total government revenues in FY2018/19.
In addition, Fitch expects government expenditures on public health will increase, with total expenditures climbing 1.5% y-o-y in FY2020/21.
While it is expected that Jamaica’s public debt load will head higher, to 96.9% of GDP by end-2020, a longer-term commitment to debt reduction will bring government debt to 74.0% of GDP by 2025, Fitch says.
Net profit at for the 6 months ending April 20, 2020, totaled $4.02Bn (EPS: $1.29), down 28.4% (or $1.60Bn) relative to $5.61Bn (EPS: $1.80) reported for the corresponding period in 2019.
An 8.4% (or $1.74Bn) decrease in net operating income was the primary contributing factor to the decline in the company’s bottom line. This was supported by, fees and commissions income, net interest income after expected credit losses, net gains on financial assets and other revenue which declined 16.2% (or $665.35Mn), 10.0% (or $1.09Bn), 21.4% (or $78.96Mn) and 90.7% (or $183.63Mn), respectively.
Scotia’s stock has declined 19.5%% since the start of the year, and closed trading at $44.68 on Monday. The stock currently trades at a P/B of 1.24x, which is below the Main Market Financial sector average of 1.78x.
Fitch Ratings affirmed on Thursday the local long-term and short-term ratings of four major financial firms in Colombia, despite rising risks to the banking sector caused by the spread of the coronavirus.
Local lenders Bancolombia, Davivienda and Banco de Occidente, along with the Colombian division of Spanish bank BBVA and the insurance firm Grupo Bolívar, all maintained their AAA(col) long-term ratings on the local scale.
The four banks have adequate liquidity, but they are likely to see profits fall and loan portfolios deteriorate in the wake of the coronavirus crisis, Fitch said, adding that their capitalization ranges from weak (Bancolombia) to adequate (Banco de Occidente and Davivienda) and robust (BBVA).
