The Casablanca Stock Exchange in Morocco has experienced a significant correction since the end of August 2026, which is not attributed to a decline in the performance of listed companies. According to CFG Research, the MASI index plummeted by 12% between August and October 2026, even as the profit margins of the listed companies rose by an impressive 7.4% in the first half of the year, with a notable adjustment of 14.2% once extraordinary items were taken into account. This discrepancy between corporate financial performance and stock market trends can largely be explained by the upward movement in bond yields. The yield on 10-year treasury bonds increased from 3.15% in January to 3.60% by October 2026, marking a rise of 45 basis points since the start of the year.
This upward trend in bond yields stands in contrast to the stability of Bank Al-Maghrib's key interest rate, which has remained at 2.25% since March 2025, amidst contained national inflation. CFG Research points out that this disconnection is primarily due to long-term rates being influenced by investor expectations and liquidity premiums, unlike short-term rates that are more closely tied to monetary policy decisions.
State Financing Uncertainties and Their Impact
The first factor contributing to the tension in the market relates to uncertainties regarding the Treasury's choices between domestic markets and international financing. CFG Research indicates that when investors anticipate a postponement of international bond issuances due to perceived costly financing conditions, they fear an increased concentration of the state’s financing needs in the local market. This perspective heightens expectations of additional pressure on domestic liquidity, prompting investors to demand higher yields on longer maturities.
Thus, the rise in rates does not necessarily correlate with an immediate increase in the Treasury's financing needs but also reflects the uncertainties surrounding its future financing choices.
The second factor identified by CFG Research is the tightening of banking liquidity and the dynamics surrounding negotiable debt securities. Facing a persistent cash flow deficit, banks have ramped up their issuance of certificates of deposit, capturing a significant share of available resources in the short to medium maturities. This mobilization of liquidity exerts an eviction effect on the bond market, diminishing institutional investor demand for long-term treasury bonds. In response to this waning demand, the Treasury is compelled to raise its yields to maintain the attractiveness of its issuances and meet its financing requirements.
The third factor pertains to currency tensions that further tighten liquidity. CFG Research highlights a temporary deterioration in liquidity conditions in the foreign exchange market due to rising energy costs and declining phosphate exports. However, foreign exchange reserves remain robust, amounting to 516 billion dirhams by the end of September 2026, reflecting a 23% year-over-year increase and covering approximately 5 months and 26 days of imports. Nevertheless, the rising energy bill and import costs, coupled with falling phosphate exports, create a temporary imbalance in the foreign exchange market. The decline in phosphate export volumes is largely attributed to logistical disruptions related to geopolitical tensions in the Middle East, exacerbating supply chain challenges for sulfur, a key raw material for phosphate fertilizers.
Inflation Expectations and Market Responses
The final factor influencing the rise in long-term rates is the anticipation of accelerating inflation in 2027. Despite the current moderation in prices, Morocco's economy remains vulnerable to the volatility of international energy prices, fluctuations in agricultural input prices, and climate-related uncertainties. CFG Research suggests that a potential scenario of another drought year in 2027, combined with sustained high oil prices due to ongoing Middle Eastern conflicts, could result in a double inflationary shock. In this context, institutional investors appear to be anticipating a less accommodative monetary policy and are demanding higher risk premiums to preserve the real yield on their bond investments.
Bank Al-Maghrib’s forecasts, referenced by CFG Research, predict an inflation rate of 0.7% for 2026, rising to 1.5% in 2027. While these levels are within historical averages for inflation in Morocco, CFG Research maintains that the gross financing needs of the state remain manageable and are not the primary cause of current tensions in yields. The increasing long-term rates have directly impacted the valuations in Casablanca, as higher required yields on bond investments compress stock valuation multiples. According to CFG Research, the stock market now reflects an implicit yield on 10-year treasury bonds at 3.80%, compared to 3.60% in the secondary market. The research firm does not exclude the possibility of continued yield increases towards 3.80% in the medium term but suggests that any further correction in the stock market will likely be marginal, as most adjustments have already been factored into price levels. In the short term, however, caution remains advisable, as CFG Research believes a trend reversal could facilitate a recovery in the market, particularly in the banking sector, which would benefit from a normalization in sovereign yields.
As reported by boursenews.ma.
