Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

DOMESTIC ECONOMIC DEVELOPMENTS

The rates on the instruments differed based on the term to maturity and tended to be lower for short-dated securities and higher for long- term issues. The average weighted yield on 91-day T-bills fell by 27 basis points to 2.74 per cent at the end of 2018. For 180-day T-bills, the rates decreased by 22 basis points to 3.21 per cent. The weighted average yield on the 365-day T-bills fell by 47 basis points to 4.01 per cent. Regarding the movements of rates for limited medium-term instruments, the weighted average yields on the 7-year bonds fell by 68 basis points to 6.25 per cent, while the yield for the 8-year bond, introduced for the first time in 2018, was 7.02 per cent. The yield on a 10-year bond was 7.30 per cent, five basis points lower than December 2017. From the perspective of the Currency Union, monetary liabilities (M2) expanded by 2.9 per cent to $16,872.8m during 2018, compared with growth of 3.4 per cent during the previous year. Growth in M2 was sustained by expansions in both narrow money (M1) and quasi money. M1 grew by 6.8 per cent ($285.6m), fuelled largely by increases of 7.4 per cent ($237.9m) in private sector demand deposits and 5.6 per cent Banking Sector Developments

confidence appeared to have remained elevated, as evidenced by a 3.6 per cent increase in total annual subscriptions to $1,716.1m. There was a marginal decline in demand by investors for instruments issued on the market during the year, as indicated by the behaviour of the bid-to-cover ratio (value of bids received/value of bids accepted), which moved to 1.33 from 1.34 at the end of December 2017. The Government of Saint Lucia remained the most active on the RGSM, accounting for 34.5 per cent of the volume of auctions, becoming the holder of the highest gross value of securities (38.8 per cent). The Government of St Vincent and the Grenadines followed with 25.9 per cent of the total value issued. Issuances by governments of Antigua and Barbuda, Grenada and Dominica accounted for 19.8 per cent, 9.2 per cent and 6.2 per cent, respectively. Two member governments improved their participation in 2018, when compared with issuance activities in the prior year, with the larger increase coming from Saint Lucia (131.8m). On the contrary, three governments reduced their participation, with the largest decrease in value coming from Grenada ($72.0m).

______________________________________________________________________________ 12 Eastern Caribbean Central Bank