Bond Market Eases as Liquidity Deficit Widens in Morocco

As the bank liquidity deficit continues to widen, the bond market maintains its downward trend, driven by increased intervention by Bank Al-Maghrib and prudent management of Treasury fundraising. On both the primary and secondary levels, rates continue to decline, confirming a dynamic that began in recent months.

The bond market continues its dynamic of easing rates, driven by a widening of the bank liquidity deficit and increased intervention by Bank Al-Maghrib. In a context where the Treasury is cautiously adjusting its levies, long-term rates are recording a new decline, confirming a trend that began in recent months. A situation that reflects an accommodating monetary environment, conducive to continued consolidation on the secondary market.

Bond market: A money market under tension

The past week was marked by a worsening of the banking liquidity deficit, which now stands at -139.6 billion dirhams (MMDH), an increase of 2.45% compared to the previous period.

In this context, Bank Al-Maghrib adjusted its intervention on the bond market by reducing the volume of its 7-day advances, which fell by 2.32 billion dirhams to 55.1 billion. Monetary rates, for their part, remained generally stable. The weighted average interbank rate (TMP) remained at 2.50%, while the MONIA rate (Moroccan overnight index average) increased slightly to reach 2.49%.

This development reflects a market that remains under control, despite persistent liquidity tensions. Monetary policy remains oriented towards stabilising financing conditions, with particular attention paid to banks’ liquidity needs.

Primary rates down on long maturities

The downward trend in rates was confirmed on the primary market, particularly on long maturities. During the last auction, the Treasury raised 1.415 billion dirhams, i.e. a satisfaction rate of 22% compared to the 6.52 billion offered.

The rates of the retained bonds continued to decline, with 2.44% for the 26-week line (-10 bps), 3.169% for the 10-year line (-5.9 bps) and 3.744% for the 20-year line (-4.1 bps). The Treasury is taking advantage of favorable conditions to refinance its debt at historically low rates. This trend could continue in the short term, especially since expectations of an international bond issue remain high.

A secondary bond market in general decline

The secondary bond market is extending the downward dynamic of the primary, with a general decline in rates across all maturities. The most marked declines were observed on medium and long-term bonds, with -7.6 bps on the 26-week line, -3.48 bps on the 52-week line and -2.57 bps on the 10-year line.

This trend reflects sustained investor interest in sovereign securities, driven by a low-rate environment. The easing of bond rates reflects a continued appetite for safe havens, in a context where the Treasury is adjusting its financing needs prudently.

Towards a consolidation of low rates?

The outlook remains favourable for a continuation of the easing of rates, driven by several factors. On the one hand, the prudent management of the Treasury, which is entering February with a relatively comfortable liquidity position, could limit tensions on primary rates on the bond market.

On the other hand, the possibility of an international bond issue strengthens the attractiveness of the domestic market, which should accentuate the downward dynamic.

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(Featured image by MabelAmber via Pixabay)

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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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