Why the Bank Liquidity Deficit Eases in Morocco

The bank liquidity deficit eased over the past week. In addition, the primary market saw a downward trend in short-term auctions, and the secondary market showed an overall downward trend in rates.

Last week saw significant developments in the money market, marked by adjustments in both bank liquidity and secondary market rates, according to Fixed Income Weekly data from BMCE Capital Global Research (BKGR). An analysis of the figures shows that the average bank liquidity deficit fell appreciably (-2.55%), to -120.4 billion dirhams (MMDH).

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Why the bank liquidity deficit eases

This improvement in the bank liquidity deficit can be explained in part by the reduction in 7-day advances from the Central Bank, which reached 40 MMDH after a fall of 730 MDH. At the same time, Treasury investments rose, with maximum daily outstanding reaching 23.9 MMDH from November 17 to 19, compared with 26.1 MMDH in the previous period.

Against this backdrop, the Average Weighted Rate (AWR) held steady at 3%, while the MONIA interbank market rate (Moroccan Overnight Index Average: overnight monetary reference index, calculated on the basis of repo transactions collateralized by Treasury Bills) fell to 2.893%.

Significant hikes and rate adjustments

At the last auction, the Treasury raised 13-week, 52-week, and 2-year lines for a total amount of 1 MMDH. The respective limit rates were set at 2.88%, 3.157% and 3.389%. These issues resulted in significant decreases of 2 basis points (bps), 10.5 bps, and 6.4 bps on these maturities at the level of the primary curve.

On the secondary market, rates trended downwards overall, with the exception of a slight rise of 0.8 bps on the 2-year maturity. The variability of secondary rates reflects the adjustments underway and the dynamics specific to each maturity.

Increased intervention by Bank Al-Maghrib

Forecasts for the coming period point to an anticipated increase in the pace of Bank Al-Maghrib’s intervention in the money market. A planned injection of 44.6 MMDH in the form of 7-day advances is envisaged, compared with 40 MMDH the previous week. These interventions are intended to maintain market stability and meet the liquidity needs of the banking system.

Interest rate policy maintained at a low level

In the face of persistent investor demand, and in anticipation of a weak December, the Kingdom’s treasurer seems determined to maintain his policy of lowering rates on short-term securities. This stance is likely to continue until the next central bank meeting, reflecting a certain financial ease and a proactive response to market conditions.

The money market thus continues to undergo significant adjustments, with interventions by the authorities aimed at maintaining balance and meeting the needs of the financial system. Investors remain attentive to future developments, in an economic context where liquidity and rates play a key role in managing risks and opportunities.

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(Featured image by Atikah Akhtar via Unsplash)

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First published in LES ECO.ma. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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