Saudi banks’ treasury bond holdings slip by SAR 3.9B to SAR 663B in May

Saudi banks' holdings of government bonds fell by SAR 3.9 billion in May to SAR 663 billion, according to data from the Saudi central bank. The month-on-month decline reverses the increase recorded in April, when holdings stood at SAR 666.9 billion.

The reduction in bond holdings may reflect a shift in bank asset allocation toward private sector lending. Saudi banks have been expanding credit to businesses and consumers. Lower holdings of government bonds free up capital for higher-yielding loans.

The Saudi central bank kept rates steady. Banks may be reducing duration risk in their portfolios.

The data covers all Saudi banks' investments in domestic government bonds, including treasury bills and sukuk. The SAR 663 billion figure represents about 15% of total banking sector assets.

The decline in bond holdings could support bank net interest margins if banks redeploy funds into loans. It may also reduce demand for government debt, potentially pushing yields higher.

The next data release for June will show whether the trend continues. Banks' bond holdings are closely watched as an indicator of liquidity conditions and risk appetite in the Saudi financial system.