2023-05-27 11:02:27
LTensions seem to be easing on the bond market, especially after the panoply of measures initiated by the Treasury since the beginning of the year to try to contain the rise in rates. It is clear that the last auction sessions on the bond market are rather reassuring for market operators and call into question the bullish consensus on bond rates for the rest of the year.
One week before the end of fundraising for May 2023, the Treasury has exceeded its announced needs by 20%. Cumulative subscriptions for the month amounted to nearly 14.7 billion DH against a monthly forecast of 12.3 billion DH. Indeed, operators are witnessing a return of appetite for Treasury bonds, thus alleviating pressure on investors’ profitability requirements. Since the beginning of May, we can clearly observe a downward movement in rates within the two primary and secondary bond curves, reaching 11 bps for the 10-year maturity, for example. Note that the current downward trend in rates remains broadly in line with the AGR scenario.
“We remain convinced that the Treasury’s new financing strategy directed towards the external market should finance its growing needs without inducing additional pressures at the domestic level”, specifies the office in a research note.
4 parameters will drive the trend
According to AGR’s own reading, the evolution of bond rates in Morocco is dependent on several parameters: first and essentially, the orientation of the monetary policy of the Central Bank during the second half of 2023. After 3 successive increases in the key rate since last September, the institution seems determined to act to reduce inflation. “In our view, BAM would logically maintain the restrictive monetary course in 2023,” analysts said.
Then, the materialization of the external financing provided for in the 2023 Finance Law. An element which acts on the bullish expectations of operators on rates. The international outflow of 2.5 billion US dollars is in line with the external financing provided for under the 2023 Finance Law at 60 billion DH. The completion rate for external drawings therefore stands at 50% at the end of March 2023, compared to 60% on average over the 2021-2022 period. The other parameter put forward by the research office relates to the orientation of Treasury financing needs at the end of 2023. Despite good budgetary control, Treasury needs should grow to 20 billion DH / month of end of the year.
Originally, the increase in Treasury debt to around 180 billion dirhams in 2023. This development is explained by the new Treasury issuance strategy during the 4th quarter of 2022 focused on the short-term compartment. The last element is the continued return of investors’ appetite for BDTs. “The rise in bond yield yield rates is still not able to restore real rates to positive territory, given the persistence of inflationary pressures”, judge analysts for whom the appreciation of demand for BDT in the 1st quarter of 2023 should be put into perspective. This took place in a context of absence of innovative financing from the Treasury and an improvement in the liquidity deficit of the banking system.
In sum, investors hope to see the easing of yields on the short and middle part of the yield curve spread over the longer part, thus reducing their unrealized losses and capital losses and offering the Treasury better financing conditions. A scenario closely linked to the evolution of inflation which has shown a slight improvement over the past two months.
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