History suggests there is plenty room for short-term Saudi market rates to rise further above US rates; the spread of one-year SAIBOR
over one-year LIBOR moved in a range of 25 to 30 bps for most of the first half of last year.
The main interbank rate, SAIBOR, has ticked up and the SR-USD 12-month forward spread is now in positive territory (just) indicating that markets think that the riyal is slightly overvalued, the report said.
This in turn reflects in part more discerning corporate customers looking for a higher yield on their deposits: The deposit rate spread over SAIBOR is understood to have widened in September and October, but has since narrowed somewhat.
The Sukuk were priced at 170 basis points over 3 months SAIBOR
and have a 2.
There has been an uptick in SAIBOR this year, which increased to 0.
This has put some upward pressure on SAIBOR, and on treasury bill yields, which need to be slightly more competitively priced in order to attract enough bids.
It is worth mentioning that the differential between SAIBOR
and LIBOR has been widening for almost a year, however, the pace is far away from worrying as SAMA (Saudi Arabian Monetary Agency) is closely monitoring risk indicators for the Saudi financial system.
The increase is attributed to increased lending activity during the period with no expected sharp rise in SAIBOR
in the short-term.
Indeed, the spread between LIBOR and SAIBOR
narrowed somewhat during this period, reflecting the more liquid relative position of the Saudi banking system.
, the three-month Saudi interbank offered rate has risen over the course of the first five months of the year to a near three-year high and the spread over the equivalent LIBOR (London interbank offered rate) has more than doubled.
The final pricing, according to Samba Capital & Investment Management Company, on SATORP's public offering of SR-denominated sukuk certificates "has been set at 6-month SAIBOR
(Saudi Arabian Interbank Offered Rate) plus a margin of 95 basis points (bps) per annum.
The cost of borrowing rose since the beginning of the past summer and the intent by the central bank is to push SAIBOR
(Saudi Interbank Offered Rate) quickly down.