Bond market: The Treasury eases off

For three consecutive weeks, the Treasury made no issuances on the domestic market. The last session of March and the first two sessions of April were blank, despite demand reaching 3.6 billion dirhams, 3.2 billion dirhams, and 3.5 billion dirhams. Total issuance for March did not exceed 7 billion dirhams, against an estimated need of 11.8 billion dirhams—representing an execution rate of less than 60%. The Treasury has deliberately slowed its weekly auctions to avoid pushing yields higher, in the face of investor pressure for rate increases. Geopolitical risks and anticipated inflationary pressures are indeed prompting investors to demand higher returns from the State.

According to Attijari Global Research (AGR), “the bond market is evolving at the intersection of two opposing forces.”

On one hand, strong macroeconomic fundamentals are supporting continued easing of rates, notably ongoing disinflation, robust economic growth, and fiscal consolidation. The latest forecasts from Bank Al-Maghrib (BAM) project growth at 5.6% and inflation at 0.8% in 2026. On the other hand, geopolitical shocks in the Middle East are fueling risk premiums and appear to be temporarily slowing the monetary easing cycle of central banks. In fact, the Treasury had stepped up its issuances at the beginning of the year, leading to an upward trend in bond yields, particularly on the short end of the curve.

Issuances reached 18.3 billion dirhams in January, compared to a financing need of 15.3 billion dirhams. In February, total monthly issuance stood at 13.5 billion dirhams, or 110% of its monthly requirement.

Increase in surplus cash placements

Currently, the Treasury prefers to refrain from meeting investor demands, as incoming funds from the first installment of corporate tax are expected to replenish State coffers. This has already been reflected in a sharp increase in Treasury placements. On a daily average basis, they reached 15.2 billion dirhams, compared to less than 8 billion dirhams a week earlier—nearly double the usual level.

At the latest auction session, primary yields rose by 36 basis points for the 52-week maturity to 2.56%, by 22 basis points for the 5-year maturity to 2.89%, and by 17 basis points for the 10-year maturity to 2.93%. On the secondary market curve, AGR noted mixed movements, with increases of up to 8 basis points on the long end and slight declines not exceeding 2 basis points on medium-term maturities.

Under these conditions, BKGR expects the Treasury to manage its return to the primary market with relative ease, allowing it to avoid fully bearing the current upward bias in the yield curve.

AGR shares a similar outlook, anticipating a lull in the rates market over the next two months. Beyond the Treasury’s issuance policy, several factors are likely to shape investor return expectations and the future trajectory of rates. These include the Treasury’s ability to control its financing needs and expectations of a resumption in BAM’s monetary easing cycle once the disinflation trend is confirmed and geopolitical risks gradually subside.

However, uncertainty remains due to limited visibility on the evolution of the conflict in the Middle East and, consequently, oil price trends. The government has already taken measures following the surge in fuel prices to preserve citizens’ purchasing power. Executive intervention, in the form of financial aid to transport operators—including taxis, buses, and school and rural transport—is estimated at 3 dirhams per liter of diesel, covering the period from March 15 to April 15.

Expected widening of the deficit

Additionally, an envelope of 1 billion dirhams is mobilized each month to keep butane gas and electricity prices unchanged. This situation is expected to weigh on the State budget and increase compensation expenses as long as no clear resolution to the conflict emerges. With stable tax revenues, the budget deficit is therefore likely to widen. However, the Treasury and the Ministry of Finance have several levers at their disposal to cope with rising fiscal expenditures, particularly through innovative financing.

In the worst-case scenario, Morocco has access to a flexible credit line granted by the IMF amounting to 4.5 billion dollars, which it can draw on without conditions.

As of the end of February 2026, the State posted a budget deficit of 34.5 billion dirhams, widening by 10 billion dirhams compared to the same period the previous year. This is mainly due to a 9.1% increase in overall spending, including a 37% rise in investment expenditure. Meanwhile, ordinary revenues have continued their decline observed since the beginning of 2026 (-4.7%). Tax revenues, the main contributor to State income, fell by 5.6% (-2.9 billion dirhams), notably due to a decrease in personal income tax receipts.

International issuance: Morocco on standby

In addition to the domestic market, the Kingdom can still turn to international markets. The Treasury can raise up to the equivalent of 60 billion dirhams. According to sources at the Ministry of Finance, teams have already initiated the preparatory work necessary for a potential international issuance.

These steps generally involve structuring the operation, calibrating maturities, selecting currencies, and assessing market conditions. However, a wait-and-see approach prevails given unsettled international conditions and foreign exchange volatility. It is worth recalling that this follows the last operation carried out in March 2025, with the issuance of a 2 billion euro bond.