Significant Difference in the Yields of Sukuk Bonds versus Conventional Bonds

M. Ariff, A. Chazi, M. Safari, A. Zarei

Research output: Contribution to journalArticle

Abstract

Bond yields of Treasury and corporate bonds are observed in a listed exchange. This article reports the findings on the market yield behaviour of two types of debt securities in the same exchange, the sharia-compliant sukuk bonds and the normal conventional bonds. There are 17 exchanges where sukuk bonds are traded, and the outstanding value is estimated at US$ 1,200 billion. The average yields of sukuk Treasury bonds are significantly higher (premium) than that of conventional Treasury bonds. On the other hand, investors in the sukuk corporate bonds receive slightly lower returns (discount) of about 25 basis points in the case of long-term sukuk bonds. To the best of our knowledge, this is the first study to verify these differences using appropriate advanced econometric methods. These results have far-reaching implications for the market practices as well as for teaching of bond pricing behaviour since this new form of debt markets is growing at about 17 per cent a year.
Original languageEnglish
Pages (from-to)115-135
Number of pages21
JournalCommunication Research
Volume16
Issue number2
DOIs
Publication statusPublished - 25 Jul 2017
Externally publishedYes

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Teaching
indebtedness
market
sharia
Costs
premium
econometrics
investor
pricing
Treasury
Conventional
Values
Debt
Investors
Sharia

Keywords

  • Bond yields
  • sukuk yields
  • zero-risk
  • risky security
  • bank deposit yields

Cite this

Significant Difference in the Yields of Sukuk Bonds versus Conventional Bonds. / Ariff, M.; Chazi, A.; Safari, M.; Zarei, A.

In: Communication Research, Vol. 16, No. 2, 25.07.2017, p. 115-135.

Research output: Contribution to journalArticle

Ariff, M. ; Chazi, A. ; Safari, M. ; Zarei, A. / Significant Difference in the Yields of Sukuk Bonds versus Conventional Bonds. In: Communication Research. 2017 ; Vol. 16, No. 2. pp. 115-135.
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