Large brokerage offering higher returns as benchmark rate climbs
Published:Wednesday | December 29, 2021 | 12:06 AM
Large brokerage NCB Capital Markets Limited has started offering higher rates to clients, consequent to the rate hikes effected by the central bank over the span of three months.
NCB Capital rates are now above 4.5 per cent on investments of $4 million and above and 4.75 per cent for $40 million and above. These rates apply to new funds under management and are valid only for the month of December 2021.
The brokerage owned by NCB Financial Group, the top banking conglomerate, previously offered rates up to 4.0 per cent but not above, said NCB Capital Chief Operating Officer Tracy-Ann Spence.
“It was only a matter of time before we saw this filter through to the market, both on funding costs and asset yields. NCB Capital raises funding as a part of its normal course of business, primarily to fund securities,” Spence said.
With the hike in benchmark rates, Spence said clients were expected to demand a higher rate of return on their funds.
“And so we have been gradually increasing our funding rate, accordingly,” she added. “This allows us to offer attractive rates to our customers to meet their investment objectives while still also meeting our objectives.”
Since the end of September, the Bank of Jamaica, BOJ, has increased its policy rate three times, adding a combined 200 basis points – aimed at taming inflation, which is currently running nearly three points above the 4-6 per cent inflation target range. The third interest rate hike effected December 20 raised the policy rate to 2.5 per cent. The next decision is scheduled for February 18.
Spence said NCB Capital started inching up rates in September, with regular reassessments, the next one being due in January.
“Our rate specials typically have a one-month period to allow us to assess the situation, and adjust if necessary,” she said.
Annual inflation is currently tracking at 7.8 per cent.
The BOJ Monetary Policy Committee, MPC, in its last rate decision noted that since its monetary policy adjustments, interest rates in the money market have increased. Additionally, the indications from the BOJ’s credit conditions survey are that banking institutions plan to increase interest rates on loans, albeit marginally.
Up to mid-December, Scotia Group Jamaica, operator of the second largest commercial bank, said they had not adjusted rates since the BOJ rate hike.
The MPC pointed to the lingering effects on international commodity and shipping prices as a major factor spurring inflation. And although such prices had declined in December, the pass-through on local prices was “stronger” than projected, the MPC said.