Bond Market and Treasury Investments See Notable Shifts: Insights from BMCE Capital’s Weekly Report

The past week was marked by a significant decline in yields on long-term debt securities and an increase in the banking liquidity deficit, which widened by 5.47% to reach MAD 145 billion. Faced with these dynamics, Bank Al-Maghrib and the Treasury continue to play a key role in stabilizing the market in Morocco, while investors readjust their expectations in light of the prospects of a more flexible monetary policy.

The bond market and Treasury investments recorded notable fluctuations during the week of September 12, 2024, according to data published by BMCE Capital Global Research in its latest Fixed Income Weekly report. The document highlights significant developments in the money market, the primary market and the secondary market for debt securities, reflecting current dynamics in the economy.

Bond market: Liquidity deficit on the rise

The report indicates an increase in the banking liquidity deficit which widened by 5.47% to reach a total of 145 billion dirhams (MMDH). At the same time, the Central Bank’s 7-day advances recorded a significant decrease, from 65 to 61.3 MMDH. This reduction in advances reflects the contraction in banks’ short-term financing needs.

Despite this situation, weekly Treasury investments have intensified, with a maximum daily outstanding amount reaching MAD 19.2 billion on September 11, 2024. This figure contrasts with the maximum outstanding amount of MAD 10.3 billion observed the previous week. This dynamic demonstrates the resilience of the market in the face of liquidity pressures, supported by Treasury interventions.

Tensions on long maturities

The auction of debt securities showed a notable decline in yields on medium and long-term lines (MLT). The 5-year securities recorded a cut-off rate of 3.0175%, a decrease of 13.8 basis points (bps), while the 15-year bonds saw their rate fall by 17.6 bps, stabilizing at 3.6253%.

This downward trend reflects an adjustment in market expectations, linked to the prospects of a more flexible monetary policy expected by Bank Al-Maghrib, as highlighted by analysts at BMCE Capital.

This drop in yields on sovereign bonds also highlights investors’ caution regarding the evolution of the economy and the expected decisions of the Central Bank. The Treasury raised a total of 3.51 billion dirhams during the last session, bringing the total of September’s collections to 8.2 billion, or 66% of the maximum requirement of 12.5 billion dirhams announced for this month.

Broad-based rate declines in the secondary market

The secondary market also saw trend declines across maturities, with the exception of 52-week bonds, which posted a slight increase of 0.7 bps. Long-term securities, in particular, saw their yields fall, with a notable decline of 15.8 bps for the 30-year line, and a decrease of 10.8 bps for 10-year bonds.

These adjustments reflect market expectations for a more favorable interest rate environment in the medium and long term. For the coming weeks, BKGR analysts anticipate an intensification of the Central Bank’s interventions on the money market. The latter should increase its 7-day advances to the tune of 67 billion dirhams, compared to 61 billion dirhams previously.

This decision supports a market in search of liquidity, while maintaining the stability of the TMP, which was set at 2.75% this week. Bond forecasts, for their part, point to a possible further drop in rates, in particular due to the decisions of the main central banks at the international level, which seem to be moving towards more accommodative monetary policies. This trend could strengthen demand for Moroccan bonds, particularly on long maturities.

__

(Featured image by MabelAmber via Pixabay)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

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.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us