Interest rates are slowly inching back up, hitting new highs each month.

The last two Treasury bills auctioned by the Bank of Jamaica yielded 12.13 per cent and 12.16 per cent respectively, the latter relating to the performance of the benchmark six-month T-bill auctioned Wednesday.

Interest rates on the six-month fell as low as 11.65 per cent in March, but since then the monthly issues haveseen gains of 15 to 17 basis points.

Market analysts say, however, that while the past four months have indicated a change of environment, it's too early to say that rates have hit a floor.

"This trajectory may just be because of election jitters," said a New Kingston analyst who requested anonymity. "Let's see what happens in the next two to three months."

The general election is set for August 27.

Nervous period

Investors generally get nervous around periods when national polls are due, often holding back on taking new risks until a clearer picture of who heads the country emerges.

The July T-bills, for example, while oversubscribed, had fewer investors chasing after the debt instrument than for previous issues.

The Bank of Jamaica received applications totalling $1.68 billion, or 87 per cent above the combined $900 million on the three-month and six-month bills offered for sale this week, but auctions on the same tenors dating back to January have seen much heavier subscriptions within a range of 102 per cent to 362 per cent, according to Financial Gleaner calculations.

The latter performance was recorded on the March six-month bill, whose yield was 11.65 per cent.

The March bills have returned the lowest yield for the calendar year to date. Since then interest rates have been climbing monthly, hitting 12.16 per cent, a year-to-date high, on Wednesday. A year ago July, the same bill yielded 12.81 per cent.

But the analyst also noted that the returns on the current July bill was only three basis points above the June issue, leaving room for speculation, he said, about where the benchmark rate would go next.

The central bank reports that there are now $4.2 billion of issued T-bills.

lavern.clarke@gleanerjm.com