Something Just Snapped In Saudi Money Markets

Away from the headlines about The Panama Papers, global financial markets turmoiled quietly this week with a surge in equity and FX volatility and banks suffering more death blows. However, something happened in Saudi Arabia's banking system that was largely uncovered by anyone in the mainstream...overnight deposit rates exploded to their highest since the financial crisis in 2009...

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It is clear that that the stress in Saudi markets has spread from the forward derivatives markets to actual funding problems.

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This suggests one of the two main things: either Saudi banks are desperatly short of liquidity or Saudi banks do not trust one another and are charging considerably more to account for the suspected credit risk.

Either way, not good. So what is going on behind the scenes in Saudi Arabia?

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Moon Kil Woong 4 years ago Contributor's comment

They are smart. Party risk is vastly misunderstood and under rated throughout the financial markets. Sadly, companies and banks have taken advantage of this offering slews of products without enough coverage and backed by companies that purposely don't have enough capital to cover mass defaults if they occur.

Be very cautious about ETFs, mutual funds, collective asset investments, and just about anything your broker peddles to make money off your investment. The money comes from somewhere. That somewhere is from your money. If you think that it is not important it is. It comes from you taking more risk so that they can finance paying themselves by putting your assets in more danger. This can be done by not properly insuring your investment which 3rd party risk can easily leave you with nothing when a crash occurs.

Be very cautious. More and more big investments are moving to short term bonds overseas as well as domestically. This is the smart money we're talking about. The reason is a fear of the instability of many investments due to 3rd party risk.

Readtheticker 4 years ago Contributor's comment

As per JIM RICKARDS Saudi most at risk of un pegging from the USD