The last three auctions of certificates of deposit in the Central Bank of the Dominican Republic have been declared vacant. The first and second of these auctions were advertised as an offering of RD$2.5 billion in certificates, and the latest announcement was for the auctioning of RD$5.0 billion in certificates. Apparently, according to the economic editor for Hoy, the failure of these auctions seems to indicate that the interest being offered by the Central Bank has reached the limits of interest for potential investors, and the certificates are no longer that attractive.
Commercial banks are the leading purchasers of the certificates. Right now they have a high rate of liquidity.
While the interest paid by the Central Bank has fallen dramatically over the last year, going from a high of just over 60% APR to just 18% offered in the last auctions, the interest rates for loans of any type have not fallen accordingly.
The fall in the Central Bank interest rates has been such that some people are speculating that further reductions should be well thought out because of the danger of falling below the break-even point on the money market.
According to sources, Hoy reports that a RD$5.0 million deposit in a commercial bank will draw just 13% APR, a deposit of less than RD$1.0 million will generate just 11% and a deposit of less than RD$100,000 only 9.5%.