SLIDE 1 P L E N A R Y S E S S I O N 3 : D o m e s t i c m a r k e t s a s a n a n s w e r t o f u t u r e c h a l l e n g e s
Royaume du Maroc
Ministère de l’Economie et des Finances
SOVEREIGN DEBT MANAGEMENT FORUM
TREASURY DEPARTMENT DEBT OFFICE
October 19-20, 2016
SLIDE 2 Domestic vs. External Debt
Central Government Debt
76% 22% 24% 78% 1983 1987 1991 1995 1999 2003 2007 2011 2015
External debt Domestic debt
SLIDE 3
Positive attributes
Domestic main source of Treasury financing : Regular issuances Reliable market infrastructure (Central Depository, RTGS, e-auction system) Well diversified domestic investor base
Domestic Debt Market
SLIDE 4 Main challenges
Yield curve not reliable enough
- YC based on real transactions, can be easily manipulated
Low secondary market liquidity
Low turnover ; High number of lines ;
Domestic Debt Market
Less transparent and predictable issuance policy
- Preannounced issuance calendar But high frequency of auctions with high proportion of
failed auctions
- Lack of predictability of weekly auction amounts
- No standard pattern of bond maturity months
SLIDE 5
Enhancing issuance strategy Deep revision of the relationship between the Treasury (issuer) and Primary Dealers Introduction of ETP Introduction of Repo facility Formalization of MT debt strategy
Main actions implemented
SLIDE 6
Round 2: Deep discussion on main actions
SLIDE 7
Enhancing issuance strategy
Simplification of issuance calendar (reduced number of lines auctioned per week) Organization of maturity months for each type of bonds Enhancement of predictability (announcement of indicative weekly amounts) Increase sizes of lines Regular program for liability management introduction of cash management
Deep revision of the relationship between the Treasury (issuer) and Primary Dealers
Objectives : develop market-making activity and enhance transparency and liquidity New incentives vs new obligations
Main actions implemented
SLIDE 8 Introduction of ETP The Market model B2B reserved to Market makers (primary dealers )
Quoting two ways firm price for certain minimum sizes. Respecting a maximum bid & ask spreads Minimum volume Respecting a minimum number of hours (at least 3hrs per day) Quoting specific lines:
- Benchmark lines 5 years and 10 years (mandatory)
- 1line in the following segments : ] 0 – 1 year] ; ] 1– 2 years] and ]10 – 30 years]
B2C reserved to buy side (institutional investors and non-PD banks) : RFQ
Electronic trading platform
SLIDE 9 Introduction of Repo facility Design of a “Repo/security lending facility” for PDs so that they can effectively conduct market making activities and comply with firm quoting obligations
Operational framework : Duration : 1 day renewable for 30 days. Rate : central bank key rate – 75 bps : for the first 10 days and 0% if exceeding 10 days. Authorized amounts per PD :
- MAD 100 millions per security and per day.
- MAD 300 millions for all securities per day.
Repo facility
SLIDE 10
Round 3: Main chalenges ahead and lessons learned
SLIDE 11 Improve the efficiency of the yield curve : Enhance the usage of the ETP Expand investor base :
- develop a domestic Sukuk compartment
- Attract non resident investors
Improve the organizational framework and the governance of the DMO
Main challenges ahead
SLIDE 12
The Treasury (issuer) has to play the leading and federative role in any
reform
Adopt a participative approach to increase the chance of success: Flexibility may be needed to insure stakeholders’ involvement in new
reforms (ex: ETP)
Main lessons/advices
