Saudi Banks Cut Bond Holdings by SAR 3.9B to SAR 663B

Saudi banks cut their holdings of government bonds by SAR 3.9 billion in May, bringing the total to SAR 663 billion. The decline ended three consecutive months of increases, according to data from the Saudi central bank.

On an annual basis, the portfolio remains higher than a year earlier. The May level is still near the upper end of the range seen over the past two years.

Saudi banks are facing growing loan demand from the private sector. Loan-to-deposit ratios have moved higher in recent months, and interbank rates have edged up. Banks may have sold bonds to free up cash for lending or to manage short-term liquidity, traders said.

Government bonds account for roughly 18% of total bank assets, making them the largest single asset class on balance sheets. The bulk of Saudi sovereign debt is concentrated in the 5- to 10-year segment. That makes the portfolio sensitive to shifts in global interest rate expectations, analysts said.

Traders said the May dip could reflect a tactical repositioning rather than a structural shift. Banks have been net buyers of Saudi bonds since late 2024, when the central bank signaled a slower pace of monetary easing. The next monthly data release, due in late June, will show whether the selling continues.

For more on how bank asset allocation shifts affect fixed-income markets, see our market analysis.