Saudi stocks ended Tuesday's trading on an upward note, supported by the rise of leading stocks, amid trades worth a total of about 4.2 billion riyals.
The main market index, TASI, rose 1.1 percent in Tuesday’s session, closing at 10,590 points, gaining 110 points.
The shares of “Saudi Aramco” and “Al Rajhi Bank” rose by 1 percent, to 25.80 riyals and 63.75 riyals, respectively.
Almarai shares closed at 45.28 riyals, up by 3 percent.
National Steel shares jumped 10 percent to two riyals in its first session on the TASI index after moving from Nomu.
The shares of “Enaya”, “Arab Sea”, “Najran Cement”, “Azm”, “Al-Asamak”, “Amana Insurance”, and “Saleh Al-Rashed” rose by rates ranging between 5 and 10 percent.
“Al-Mowasat” shares rose by more than 2 percent to 63 riyals, after the company announced the distribution of cash dividends to shareholders.
On the other hand, “Building Station” shares closed at 37.50 riyals, down by 2 percent, following the end of eligibility for cash dividends to shareholders.
Al-Andalus shares fell by 1 percent, after the company announced that it would not distribute cash dividends for the first half of 2026.
On Tuesday, Bank of Japan Governor Kazuo Ueda gave a new indication of the bank’s readiness to continue raising interest rates, stressing that stabilizing core inflation around the 2 percent target has become “more important than before,” in a noticeable tightening of the bank’s language before its expected meeting at the end of October (October), amid mounting pressures from raw material and energy prices, a weak yen, and strong demand linked to artificial intelligence. Ueda's comments come ahead of the two-day monetary policy meeting that ends on October 30, as investors await new quarterly forecasts for growth and inflation for clues on the timing of the next increase in interest rates. Ueda said, in a speech before the annual meeting of securities companies, that economic developments and prices are generally moving in accordance with the expectations of the Bank of Japan, and that the economy continues to recover at a moderate pace, while the quarterly Tankan survey showed the strength of corporate sentiment. He added that the rise in raw material costs is pushing up wholesale price inflation, and that these pressures are gradually being transmitted to consumer prices, coinciding with the continued rise in long-term inflation expectations.
• Preventing inflation from exceeding the target
Ueda stressed that financial conditions remain accommodative and support economic activity even after the increase in interest rates last month, stressing that the bank will continue to raise borrowing costs to adjust the degree of monetary support. He said: “It has become more important than before to ensure the stability of core inflation around 2 percent,” so that there are no risks of inflation exceeding the target, which could cause harm to the economy. This wording carries special importance. In its September rate hike statement, the bank merely said that keeping core inflation around the target was “important,” while Ueda now used the expression “more important than before,” referring to policymakers’ increased focus on the risks of rising prices.
The Bank of Japan raised the key interest rate last month to the highest level in 31 years, and Ueda indicated at the time that the bank had entered a phase that focused more on preventing core inflation from exceeding the target, which strengthened expectations of continued monetary tightening. This comes after decades during which the main challenge was combating deflation and stimulating prices. Economy Minister Minoru Kiyuchi said last week that Japan is no longer in deflation and does not need excessively easy monetary policy to raise inflation.
• 3 pressures on prices
Ueda identified a group of risks that could push core inflation to exceed 2 percent, foremost of which is the rise in energy prices linked to the US-Israeli war on Iran, in addition to the weak yen and strong demand linked to artificial intelligence. The weakness of the Japanese currency represents a direct channel for the transmission of inflation, as it increases the cost of imports, especially energy, raw materials, and food. The economy's sensitivity to these developments increases given Japan's almost complete dependence on imported oil. As for artificial intelligence, it has become a new element in bank accounts.
Deputy Governor Shinichi Uchida described the global spread of technology as a “significant positive shock to demand,” noting that investments related to chips, data centers and digital infrastructure raised economic activity and asset prices.
The bank believes that the boom in artificial intelligence may increase productivity and production capacity in the future, but at the current stage it enhances demand, which may add more inflationary pressures. Huge bond issuances from companies linked to the sector are in turn putting pressure on long-term interest rates.
Bonds increase the complexity of the scene
Ueda's tougher tone coincides with sharp fluctuations in Japan's debt market. The 30-year government bond yield reached a record level of 4.24 percent during Tuesday’s trading, while the 10-year bond yield reached 3.1 percent. But a 10-year bond auction attracted the strongest demand since May, which helped allay fears that yields would continue to rise unabated, and supported the stock market, as the Nikkei 225 index closed above 70,000 points. These developments overlap with the government's fiscal policy. Prime Minister Sanae Takaichi has pledged to control bond issuance and maintain public finances sustainability, in an attempt to reassure markets about her spending plans. The rise in interest and yields represents an additional challenge for Tokyo, in light of the large public debt, as the high cost of borrowing increases the burden of debt service. In contrast, maintaining ultra-loose monetary policy for a longer period may increase pressure on the yen and fuel imported inflation. Thus, the Bank of Japan enters its meeting at the end of October facing a delicate equation: the economy is still recovering and corporate sentiment is holding up, but price pressures are expanding from raw materials and wholesale prices to the consumer, while long-term inflation expectations are rising. The new growth and inflation forecasts released by the bank on October 30 will be a leading indicator for the markets. If the data continues to move according to the bank’s basic scenario, Ueda’s message indicates that the door remains open for further rate hikes, with the priority of monetary policy clearly moving from achieving inflation at 2 percent to ensuring its stability around this level and preventing it from exceeding it in a sustainable manner.
Investor money flows into money market funds have slowed significantly this year; This pushed US Treasury bill yields higher, and may make markets more vulnerable to short-term financing problems.
Total flows to money market funds amounted to only $158 billion during the first nine months of the year, according to data from the banking, financial and investment services company TD Securities, compared to $823 billion during the entire year of 2025, and $840 billion in 2024, according to Reuters.
Analysts said the slowdown in flows into money market funds weakened demand for Treasury bills; Which pushed its returns in recent sessions to rise compared to similar overnight index swaps, which are one of the main money market indicators that reflect expectations of raising interest rates by the Federal Reserve Board, and which are included in the swap markets.
“If money market funds are not getting those flows, they have to think about where they want to put their money,” said Sam Earle, US interest rate strategist at Barclays Banking Group.
However, money market funds remain net buyers of Treasury bills, although the pace of demand has slowed significantly. By the end of last August, its holdings of treasury bills had increased by about 4 percent compared to the end of 2025, according to the latest data from the Investment Companies Institute, compared to an increase of 18 percent during the entire year 2025.
Signs of investor anxiety
The weak pace of demand is beginning to show in the relative pricing of Treasury bills; Investors demand a higher premium to hold it.
Yields on 3-month US Treasury bills rose by about 10 basis points above 3-month index swap returns on Monday, after the spread last week recorded its widest level since September 2024. As for 6-month Treasury bills, the spread reached 11.3 basis points on Monday, after touching 12.5 basis points last week, which is the highest level since April 2025.
This spread measures the valuation of Treasury bills compared to the path the market expects for the Federal Reserve's policy on short-term interest rates. When Treasury bill yields are higher, this indicates that investors are demanding additional compensation for holding short-term US debt, which is usually highly rated due to its liquidity and near risk-free assets.
Nafis Smith, director and head of the “Taxable Money Markets Department” at Vanguard Investment Group, said that the strength of the US stock market this year contributed to reducing money flows to money market funds. It reduced the tendency of investors to transfer their money to cash. The Standard & Poor's 500 index has risen by about 13 percent since the beginning of the year, while the Nasdaq index has risen 18 percent.
Analysts said that the rise in Treasury bill yields, along with the slowdown in purchases of money market funds, also reflects expectations of a significant increase in Treasury issuance during the fourth quarter, as well as the possibility of further interest rate increases by the Federal Reserve.
Barclays Bank estimates that the Treasury will issue about $225 billion in Treasury bills this October, and about another $160 billion next November. This would push yields higher as the market is flooded with short-term issues.
Yields also rose in the longer part of the yield curve, in light of increased corporate debt issuances to finance the expansion of artificial intelligence, deficit spending in the United States and around the world, in addition to strong domestic economic growth.
Gennady Goldberg, head of US interest rate strategy at TD Securities, said: “The Treasury is keen to focus a larger portion of issuance in the shorter terms of the curve. That is, treasury bills, but the largest source of demand is slowing down, and this is a matter of concern.
Higher yields, if they persist, may alter funds flows through short-term financing markets. If money market funds shift their funds from overnight repurchase agreement markets to higher-yielding Treasury bills, coinciding with increased bill issuances, financing conditions may tighten; This pushes the prices of repurchase agreements to rise and raises financing costs for dealers and market participants.
But analysts said it was too early to sound the alarm about that; Fund flows into money market funds typically accelerate in the fourth quarter, as investors increase their cash balances in preparation for year-end liquidity needs, pay taxes, and rebalance investment portfolios.
Continued uncertainty about interest rates
Currently, the increase in Treasury bill yields also reflects growing uncertainty about the path of interest rates. LSEG estimates showed that US interest rate futures are currently pricing in one rate cut of 25 basis points this year, and two more in 2027.
Money market fund managers tend to reduce the maturities of their portfolios when they expect interest rates to rise; Short-term debts mature faster; This allows managers to reinvest the money with higher returns if the Federal Reserve raises interest rates.
“We see interest rate hike expectations ebb and flow, and for a money market fund focused on capital preservation, this uncertainty creates a natural incentive to keep maturities short,” Vanguard's Smith said.
The average maturity of a money market fund portfolio decreased to 36 days last month, from a peak of 42 days in May, according to TD data. However, this average is still well above the 2022 low of just 15 days.
The current movement in Treasury bill yields does not appear, at the present time, to be an indication of pressures in the underlying financing markets.
Analysts said repurchase agreement markets, which are often the first to show funding pressures, were still operating smoothly. Treasury officials have also repeatedly stressed that demand for Treasury bills from stable currencies and money market funds remains strong, even as demand has declined slightly, but caution appears to be prevailing at the moment.
“We're seeing volatility in the short part of the yield curve that I don't think the market has gotten used to,” Vanguard's Smith said. He added that this “creates an incentive for the money market fund to shorten its maturities and demand a higher risk premium.”
