Moroccan Bond Market Enters Gradual Normalization as Liquidity Eases and Yields Rise

The bond market in Morocco is entering a phase of gradual normalization, driven by a moderate easing of the bank liquidity deficit and a marked return of short-term issuances. Bullish signals observed across several maturities reflect a repositioning of investors, while the Treasury prudently adjusts its financing needs.

Interest rate dynamics are part of a gradual normalization process, marked by a measured easing of bank liquidity. According to BMCE Capital Global Research (BKGR), the average liquidity deficit is shrinking to -136.8 billion dirhams (MMDH), a decrease of -0.65%.

Improved bank liquidity, rising yields, and cautious Treasury actions shape a steady, selective bond market recovery

At the same time, Bank Al-Maghrib’s (BAM) 7-day advances increased to 69.6 billion dirhams, representing a slight increase in resource injections into the banking system. Treasury investments were more modest than the previous week, with their maximum daily outstanding amount reaching 7.9 billion dirhams, compared to 10.3 billion dirhams previously.

The interbank market remains stable and disciplined, with the TMP holding steady at 2.25%, while the MONIA is retreating towards 2.231%, reflecting a slightly easing monetary environment.

Short-term bonds lead the primary market. The primary market is notable for the renewed activity observed in short-term maturities. At the last auction, the Treasury raised 3.99 billion dirhams out of a total offer of 10.11 billion dirhams, representing a 39% subscription rate. Two bond lines accounted for the majority of subscriptions: the 26-week maturity, offered at a maximum rate of 2.25%, and the 2-year maturity, at a rate of 2.5551%.

BKGR specifies that these levels correspond to respective variations of 17 basis points (bps) for the short term and 5.7 bps for the 2-year term. Longer maturities were not included, as no subscriptions were validated for the 10-year and 20-year segments, confirming the cautious approach of the Treasury and investors, who are more focused on the flexibility and visibility offered by the short term.

A Secondary Market Tilting Upwards

On the secondary market, the trend is clearly shifting towards higher yields. According to BKGR, rates are rising across several maturities, particularly the 10-year yield, which has gained 13 basis points, the 15-year yield, which has advanced by 9.62 basis points, and the 2-year yield, which has appreciated by 8.66 basis points. This movement underscores an upward adjustment in the middle and long ends of the yield curve, reflecting a market that is gradually incorporating expectations regarding monetary policy and Treasury financing.

The levels observed suggest that investors are demanding additional returns to position themselves over longer periods, in a context where the future trajectory of rates remains a central element of arbitrage.

Bond issuance activity remains limited but targeted. Three issues were recorded during the period under review, including two CIH Bank issues with a ten-year maturity, one at a cover rate of 3.56% and the other offered with the same maturity at a fixed rate of 2.78%. In addition, there was a five-year FT SOFAC AL III issue at a cover rate of 2.94%. No activity was reported in the BSF, BT, or CD segments, indicating an active but selective market.

Outlook

For the coming period, BKGR anticipates a slight intensification of BAM’s interventions in the money market, with a volume of 7-day advances expected to be around 70.8 billion dirhams, compared to 69.5 billion previously.

The Treasury is expected to maintain a steady pace of issuance in December, despite the absence of major maturities, in order to more comfortably prepare for the first maturities of 2026. The scenario described by BKGR favours an upward bias on short rates, while intermediate maturities seem to offer the best balance between carry and risk.

The approach remains cautious, however, a few weeks before the last annual meeting of the Monetary Policy Committee, which could guide expectations for the beginning of the following year.

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(Featured image by Jakub Żerdzicki 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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