Morocco Sells 1 Billion Euro Bond as Borrowing Costs Fall

Morocco sold its first euro-denominated bonds in four years after yields fell to all-time lows and stimulus measures in Europe help boost demand for riskier assets.

The government issued 1 billion euros ($1.4 billion) of 10-year bonds at 215 basis points above midswaps, the country’s Economy and Finance Minister Mohamed Boussaid said in an interview yesterday. The yield on Morocco’s October 2020 debt has dropped 124 basis points year to 3.06 percent, within five basis points of record low on May 30.

The North African country joins Emirates Telecommunications Corp. and Turkiye Vakiflar Bankasi in tapping international markets after the European Central Bank cut interest rates last week. The ECB took its deposit rate negative, helping demand for higher-yielding assets.

“ECB actions are definitely positive for the market,” Will Nef, who helps manage $3 billion in emerging-market bonds at Union Bancaire Privee in Zurich, said by e-mail. “215 basis points looks relatively generous. People are chasing anything that is yielding something given that developed rates in euros have come off so much.”

BNP Paribas SA, Commerzbank AG and Natixis managed the Moroccan debt deal, the first in euro-denominated bonds since the nation sold 1 billion euros of fixed-income securities in September 2010, according to data compiled by Bloomberg.

Slowing Growth

Morocco’s economic growth may slow to 3.5 percent this year, Boussaid said, the second time in a month the net oil importer trims growth forecasts amid growing turmoil in the region.

The $105-billion economy added 4.8 percent in 2013 after a better cereals harvest than this year’s. The government budgeted a 4.2 percent expansion in gross domestic product for 2014. On May 16, Budget Minister Driss El Azami El Idrissi said GDP growth would be about 4 percent.

The government plans to axe subsidies on widely-used diesel fuel as of 2015 while keeping them for cooking gas, sugar and wheat flour, Boussaid said.

The government has taken the boldest steps to date among peers in the region in dismantling subsidies as it sought to fix public finances hurt by a spending spree that helped the longest serving Arab monarchy contain a wave of revolts that hit the Arab world.

Boussaid maintained the budget deficit target for 2014 at 4.9 percent compared with 5.5 percent in 2013. He said the deficit is forecast to fall to 3 percent by 2017. Morocco is a net oil and gas importer and its 2014 budget was based on an oil price of $105 a barrel.

Besides the 1 billion euros it raised from yesterday’s bond sale, Rabat expects the 1.5 billion euros in outstanding external financing needs for 2014 to come from international financial organizations including the World Bank, the Arab Monetary Fund, the European Investment Bank and the Islamic Development Bank, Boussaid said.

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