The Correction Amid Bond-Market Tensions and Sagging Sentiment

After an exceptional year in 2025, marked by a 27.6% surge in the broad index, the Casablanca Stock Exchange began 2026 at a more moderate pace. A turbulent start to the year which, in many respects, fits market logic.

Indeed, after such a pronounced rally, profit-taking set in. Investors, especially retail investors, sought to lock in gains following this sharp rise in the equities market.

However, the move quickly went beyond the simple scope of tactical arbitrage. The market entered a correction phase longer than expected, stringing together declines session after session. As of February 10, the MASI was posting an underperformance of around 3%, a broad-based drop that spared no listed sector.

Yet, from a fundamental standpoint, macroeconomic indicators remain overall well oriented. Growth prospects remain favorable, and forecasts for listed companies’ results continue to show solid trajectories. The correction observed therefore stems more from cyclical and technical factors than from any structural deterioration.

Among the main catalysts that amplified this correction was the Treasury’s marked return to the domestic market. At the end of last year, the State carried out sizable borrowings on the Treasury bill market, alongside an acceleration in the use of innovative financing, for an amount of 25 billion dirhams.

In total, this mechanism generated MAD 40 billion in revenues in 2025, exceeding the initial forecasts of MAD 35 billion. This intensification of issuance had the effect of drying up liquidity on the secondary market, as institutional investors contributed heavily to refinancing the State.

Pressure on rates

In this context, the Treasury’s return to the auction market at the start of the year mechanically put upward pressure on rates, as investors demanded more attractive yields.

And in order to contain the tension across all maturities on the curve, the Treasury concentrated its issuance more on the 2-year segment which, over just a few sessions, recorded an increase of nearly 50 basis points, reaching as high as 2.79%—almost the same yield level as the 5-year curve.

In this context, the risk-return trade-off clearly shifted in favor of bond investments, since investors anticipated continued increases and also expected the move to extend to the rest of the curve. But that was not the case.

During the latest auction sessions, the Treasury satisfied only a limited portion of the expressed demand, reducing the amount raised despite bids being far higher—such as in the February 3 session when, faced with demand of MAD 11.5 billion, the Treasury raised less than MAD 2 billion, thereby pushing 2-year yields down by about 7 basis points to 2.72%, a level still considered high.

One session earlier, no Treasury bill issuance was carried out on the market. In a market already constrained by liquidity, rising rates intensified the selling pressure on equities. Sell orders, from both retail and institutional investors, struggled to find buyers, mechanically amplifying the decline in prices.

To these purely technical factors were added exogenous elements, notably the floods that affected several regions of the Kingdom, particularly the North and the North-East.

Their economic repercussions are being felt through a pullback in household consumption, a slowdown in worksites, a decline in cement consumption, deterioration of certain road links, and possible postponements—or even cancellations—of tourist bookings.

Rising risk aversion

While rainfall is usually a positive signal for investors, these extreme episodes have, paradoxically, revived short-term concerns. Risk aversion has therefore increased, with some market participants fearing a low-yield agricultural season. A scenario which, according to several expectations, should nevertheless not materialize.

Admittedly, the first quarter is expected to end with an unfavorable agricultural performance, but once the episodes of heavy rain subside, the outlook would point toward an exceptional season, likely to support national growth.

As for stock market prospects, this turbulent phase should continue until the end of February, or even early March, before a more stable trend takes shape. While the first quarter may not close under the best auspices, the second would show a gradual improvement, while the third quarter is expected to be clearly more supportive.

By that horizon, several drivers should operate simultaneously, including the rebound in the agricultural sector, the ramp-up of major projects, the tourism recovery—factors that could encourage a strong return of flows to the equities market.

Additional catalysts could amplify this dynamic, notably the completion of the expected IPOs, such as Jet Energy or Dislog, which would send a positive signal to the market and encourage investors’ return. Failing IPOs, the impact would certainly be less pronounced, but a crowding-out effect would occur in favor of other listed stocks, in particular growth names and core portfolio holdings, such as Marsa Maroc, Cosumar, Akdital, etc.

At this stage, visibility remains limited regarding the MASI’s very short-term trajectory. Projections range between -5% and +5% for the first quarter. For the full year 2026, market consensus nevertheless expects an increase of between 10% and 15%, driven by the anticipated improvement in domestic fundamentals and the gradual return of liquidity to equity assets.

Soon a study on retail investor behavior

The Casablanca Stock Exchange is considering launching a study on the profile and behavior of individual investors on the stock market.

Nasser Seddiki, Chief Executive Officer of the Casablanca Stock Exchange, explained at the APSB’s annual conference that the study pursues a twofold objective: first, to better understand their investment horizon, risk appetite, use of digital tools, and their behavior during upswings or corrections.

Second, it is intended to put in place the necessary mechanisms to support and monitor the market, depending on the results obtained, by implementing targeted and personalized actions.