Bond Market Dynamics
The bond market has not seen a reprieve from the corrections that began in the last quarter of 2025, with January continuing this trend. The secondary yield curve has tightened across all maturities, influenced by strained liquidity and a sustained presence of the Treasury in the primary market.
This environment contributes to heightened short-term volatility, even as monetary policy remains unchanged. Bank Al-Maghrib held its key interest rate steady at 2.25% in December, opting for a wait-and-see approach despite historically low inflation.
Twin Capital Gestion notes that the anticipated price trajectory of around 1.3% for 2026, along with improved agricultural outlooks, keeps the possibility of monetary easing later in the year on the table. A potential reduction of 25 basis points in the spring or early summer could serve as a primary catalyst for a gradual relaxation of the yield curve.
In the medium term, the dynamics of the bond market will also hinge on the Treasury's ability to secure planned external financing. Successful execution of these plans could alleviate pressure on the domestic market and reduce the need for internal fundraising, particularly as institutional demand remains robust.
Equity Market Overview
The equity market presents a stark contrast to 2025. Following a year where the MASI index surged over 25% and reached a historic peak in the summer, the beginning of 2026 is characterized by a consolidation phase that still offers attractive entry points for select stocks.
This shift reflects a change in pace rather than a reversal, as the market adjusts to more demanding valuation levels. Nevertheless, the underlying fundamentals remain strong.
Economic growth is expected to stabilize around 5% in 2026, while the earnings of listed companies continue to rise, particularly driven by the banking and public works sectors.
With dividend yields nearing 4%, the market continues to present an attractive differential compared to bond yields, maintaining a favorable risk premium.
Despite the upward movement of the yield curve, the equity market retains its appeal, bolstered by high dividend yields and a risk premium of approximately 108 basis points.
Outlook for 2026
Twin Capital Gestion forecasts a positive performance for the equity market in 2026, building on the momentum from 2024 and 2025, albeit with increased caution regarding the valuation levels of certain stocks.
The central scenario anticipates growth primarily driven by earnings increases and dividend distributions, with a more limited contribution from multiple expansions. The expected performance of the MASI is projected to fall within a range of 10% to 15%, contingent on the stability of the macro-financial environment.
The report also highlights a gradual tightening of market conditions. The dispersion of valuations across sectors, the return of volatility, and international uncertainties necessitate a more nuanced approach to stock selection.
After two years dominated by trend effects, the upcoming phase is expected to emphasize the importance of value selection and analysis of earnings trajectories.
In summary, while the fundamentals of the capital market remain favorable, 2026 is poised to be a year that demands greater discipline in both the bond and equity markets.
