Treasury Bills: Sight-Based Navigation, Panic on the Market

Stupefaction in bond trading rooms this early evening of January 20th. The results displayed on the dedicated Treasury bill auction platform are enough to disconcert the primary dealers and the investors who bid on it to purchase new public debt securities.

Once again, the Treasury scoops up everything offered on the two-year securities: the entirety of the 4.78 billion dirhams allocated (against a demand of 6.57 billion dirhams) corresponds to 2-year bills, where the satisfaction rate neared 97%.

The impact on this maturity, central to the yield curve, is staggering: 21 basis points in one go (see infographic). “It’s a leap worthy of a monetary crisis environment. The Treasury is signaling that it is in dire straits, ready to finance itself at any cost,” comments a seasoned portfolio manager.

All the more so as this is the second consecutive session where the heart of the yield curve undergoes severe distortion due to the Treasury’s curious funding choices. During the previous auctions (on January 13th), 6 billion dirhams were exclusively allocated to 5-year bills (95% of demand satisfied), driving the primary rate for this maturity up by 16 basis points…

A behavior that worries the market, as it fosters a mindset of overbidding among investors, fearing a shock from their primary client who seems to be navigating by sight. Suffice to say that the auction sessions have been turning into high-stakes poker bluffs for several weeks now…

Year-end Under Pressure

The first signs of the Treasury’s unease began to appear two months ago already, on November 17th to be precise. Market operators witnessed a rare occurrence: the accepted bids on the same subscription line—the five-year bills once again—displayed a differential of 14 basis points.

No less than 5 billion dirhams were raised that day on this maturity at rates fluctuating between 2.58% and 2.72%. “More than a spread, it’s a gap that places investors in an underperformance situation right from the settlement-delivery stage, it immediately distorts the market,” explains our source.

Here too, the primary yield curve immediately felt the blow: the weighted average overheated by 5 basis points. During the following sessions, it was the two-year rates that would soar.

Sensing the Treasury’s lack of visibility regarding other budgetary revenues, operators put pressure on this other highly sensitive component of the yield curve. 6.4 billion dirhams were thus offered on the 2-year bills and the Treasury would scoop them up indiscriminately: 4 billion were accepted, validating a 10 basis point increase on both the primary and secondary markets.

The trend would continue for two more sessions: cumulatively, 6.5 billion were awarded on this maturity, resulting in a primary rate increase of 5 basis points.

This Treasury binge is all the more surprising for the market as the amounts raised far exceed the communicated needs: 18 billion mobilized during this month of November, while it was only supposed to draw 15 billion. And already the month before (October 2025), Tarik Bchir’s teams had overshot their forecasts by two billion.

Both portfolio managers and investors absorb this market disruption at year-end, compensating with fairly respectable 2025 performances and console themselves by saying it’s only a temporary shift. Especially since during December, the Treasury eased off the pedal.

One session of abstention, another under the sign of stabilization, and even two sessions of debt buybacks. This is because an innovative financing operation (State OPCI) came to replenish the coffers by some 15 billion dirhams, leverage effect included.

The Treasury then finds itself with a liquidity surplus estimated at over 20 billion dirhams. It even changes tack and starts repurchasing its own securities: in two sessions, carried out in less than a week, it amasses over 13 billion dirhams worth of Treasury bills.

Despite these “investments,” it closes the year with a liquidity surplus estimated at nearly 10 billion dirhams. Yet another unprecedented fact, according to market professionals accustomed to seeing the Treasury close its accounts with a surplus not exceeding one billion.

Unjustified Rate Hike

Operators thought they were starting 2026 on a good footing, attributing this tumultuous episode to the profit and loss of a market correction, but they hadn’t accounted for the Treasury teams, who would reoffend from the very first auction sessions.

During the first issuance on January 5th (issued December 30th), it stuck to its policy of scooping up 2-year bills, but this time at a stable price. A week later, 4.3 billion dirhams were added to the outstanding amount of two-year bills, validating the year’s first increase of 2 basis points.

And during the last two outings (auctions on January 13th and 20th), we witnessed those spectacular jumps in 2-year and 5-year rates. “This is becoming a structural upward trend in rates that is unjustified from a macroeconomic standpoint,” protests one market operator.

For him, as for so many of his peers, the Treasury is far from the standards of active debt management, but rather practices a sight-based navigation of funding needs. Moreover, across these four auction sessions of 2026, the Treasury has exceeded the announced weekly needs each time, just as it has already surpassed its forecasts for this first month of the year by nearly 2 billion.

“This discrepancy reveals a lack of coordination between the Treasury and the Budget department. Perhaps a breakdown of trust between the State and its banker, who is no longer kept informed of incoming funds as was demonstrated last December with the innovative financing operation,” analyzes a market insider.

Operators are also surprised to see the Treasury continue to abstain from marking the curve on the longest maturities. Offers on 20-year and 30-year bonds have so far been declined, preferring to maintain pressure on the 2-year and 5-year rates.

In this context, the secondary market is under significant pressure: the market remains a seller on long-term securities, fearing a sudden and severe correction in the primary market. Portfolio managers thus prefer to renew their stock seeing that the Treasury is consolidating this distortion at the heart of the curve.

Except that the Kingdom’s treasurer cannot continue in this headlong rush and sustain a rate increase, while all macroeconomic indicators are green and professionals even expect a monetary policy easing. More dynamic debt management is imperative: the cost of financing the state budget is at stake…

Debt Market: The Competition from Private Placements

In 2025, the Treasury raised 143.7 billion dirhams, of which 72% were allocated to repay old debts. The funding offers submitted by Primary Dealers (IVTs) amounted to 325 billion dirhams.

This is 25 billion more than the demand expressed a year earlier, even though the Treasury bill market now faces competition from innovative financing.

Some 35 billion dirhams were mobilized in 2025 by the State’s OPCIs, which siphoned off (excluding leverage effect) around 20 billion dirhams from the market. Furthermore, the simplification of access to financing advocated by the Capital Markets Authority has favored private bond placements.

A record number of such operations was recorded in 2025, cumulatively raising some 61 billion dirhams, which is 47 billion more than the previous year. A windfall that escapes the capital offers submitted to the Treasury. To hope to capture it, it would need to show more innovation by diversifying its funding offer.