`Unsustainable' U.A.E. Rate Climb Seen Reversing on Tax Giveaway - Bloomberg:
An “unsustainable” increase in the United Arab Emirates’ lending benchmark will reverse once the government doles out the tax revenue whose withdrawal from deposits spurred the rise, according to the biggest bank in Dubai.
The three-month Eibor has climbed in the past three weeks despite a decline in a similar dollar rate, an oddity because the dirham is pegged to the U.S. currency. The spread with the three-month Libor widened to 36 basis points last week, the biggest differential in more than two years, according to data compiled by Bloomberg.
The federal government’s “sudden withdrawal of cash from the large Eibor-fixing banks” is probably to blame, Anita Yadav, the head of fixed-income research at Emirates NBD, said in a report. As banks came under funding pressure, they responded by paying high interbank rates to lure money ahead of quarter-end reporting, she said.
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