Three-month SAIBOR drops to 12-month low

The three-month Saudi Arabian Interbank Offered Rate (SAIBOR) shed 65 basis points (bps) to a 12-month low of 1.73 percent at the end of March, compared to its peak at 2.39 percent in October 2016, data compiled by Argaam showed.

SAIBOR rose continuously from 0.77 in August 2015 to 2.39 in October. Since then it has retreated, despite an increase in the reverse repo rate by the kingdom’s central bank last month which hit overnight operations, the data added.

The decline in SAIBOR was driven by the rise in net liquid assets at Saudi banks amid a slowdown in lending and the central bank’s decision to inject cash into banks.

The rise in SAIBOR during 2016 led to a rise in financing charges among companies with high leverage. These companies are expected to partially benefit if this decline in continues.

Historically, the three-month SAIBOR is usually 50-70 bps above the reverse repo, amid eased liquidity conditions.