The Central Bank of Jordan said on Thursday it sold 18-month Treasury bonds worth JD100 million ($141 million) with the average yield falling to 3.103 per cent from 7.336 per cent at its last 18-month issue in November 2008.

The Central Bank of Jordan (CBJ), which has mostly issued three-year T-bonds this year, had invited offers for this issue at the auction this week for settlement on Wednesday.

The bond issue was oversubscribed with offers worth JD194 million and accepted yields between 2.245 and 3.103 per cent, the central bank said.

The bills, which are open to local and foreign investors via banks, mature on October 15, 2011.

The monetary authorities have resorted since last year to issuing more T-bills and bonds to finance growing public debt.

The central bank has slashed its benchmark lending rate by 250 basis points since November 2008 as the economy went into a downturn and inflation fell from record highs.

That put downward pressure on interbank rates, which have dropped on average by at least one percentage point since mid-2009, bankers say.

However, three-year T-bond yields have for the last four issues edged slightly higher, within a narrow range of 4.063 per cent to 4.243 per cent in the latest auction this week.

The market believes the monetary authorities have less room for further interest rate cuts as inflationary pressures rise.

The CBJ also cut reserve requirements on commercial deposits and stopped issuing certificates of deposit since October last year to free up funds for lending to spur growth.

CBJ data shows that compulsory reserves of private banks'  foreign and domestic currency deposits held with the central bank stood at JD1.113 billion ($1.57 billion) on Thursday.

Liquidity in the domestic money market stood at JD3.981 billion, including overnight deposits.-Reuters