When Bank Al-Maghrib comes to the aid of the secondary market

Thing “promised” thing due: The first call for tenders relating to a structural operation for the purchase of Treasury bonds on the secondary market was organized last Monday by the Central Bank, recording an overall demand of nearly 15 billion of dirhams completely satisfied by the issuing institution.

As part of the monetary policy instruments, this operation, it should be remembered, is qualified as “structural” insofar as it is intended to manage a situation of surplus or insufficient liquidity of a lasting nature. It can either take the form of purchases or sales of securities issued by the Treasury on the secondary market, or the form of issue by BAM of negotiable debt securities and their repurchase.

According to the economist and foreign exchange policy specialist, Omar Bakkou, the Central Bank can use “quantitative” instruments, in this case intervention on the secondary market for Treasury bills, in order to manage a situation of lasting lack of liquidity, through the purchase by BAM of securities issued by the Treasury on this market.

This is an operation that acts directly on the quantity of currency in circulation, allowing the Bank to regulate the market and manage the liquidity of investors, the specialist had indicated in a statement to MAP.

The main purpose of this intervention is to regulate the market for treasury bills and public debt, and remedy the “distortion” of the yield curve, which is starting to show an upward trend.

“Anticipating possible increases in the key rate in the future, investors are demanding higher rates on securities held in the medium term. This overreaction is automatically reflected in the Treasury bond market for fear of a deterioration in the value of these financial instruments held in the portfolio,” explains the economist.

This decision is therefore intended to act on the expectations of banks, thus pushing them to review the interest rate demanded in return for the holding of medium-term Treasury bonds, he adds, noting that it This is a “support measure for the policy of raising key interest rates”, aimed at remedying the “negative effects” of this increase on the Treasury bill market.

BAM organized, last Monday, a call for tenders relating to a structural operation for the purchase of Treasury bonds on the secondary market, in accordance with the decision of the Wali No 80-W-20 and Circular Letter No LC-BKAM -2020-8 relating to monetary policy instruments. The next call for tenders is scheduled for January 16.

During this first operation, the average maturity of the Treasury bonds purchased by BAM was 6.5 months and the average rate of return was 3.34%.