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Exploring the Yield Spread Between Sukuk and Conventional Bonds in Malaysia

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  • Nurin Haniah Asmuni
  • Ken Seng Tan

Abstract

This article aims to shed light on the differences in yield rate between conventional bond and sukuk in the Malaysian market. We find that the historical yield rates for the government-issued sukuk is significantly higher than the conventional bond. Conversely, there is a slight yield spread discount between the corporate-issued sukuk and bonds for all rating classes. We conclude that liquidity factor can mainly explain the positive yield spread on the government-issued sukuk . We also illustrate the effect of tax and expenses on asset pricing, which may contribute to the yield spread discount for corporate issuance. JEL Classification: E43, G12, G13

Suggested Citation

  • Nurin Haniah Asmuni & Ken Seng Tan, 2021. "Exploring the Yield Spread Between Sukuk and Conventional Bonds in Malaysia," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 20(2), pages 165-191, August.
    • Handle: RePEc:sae:emffin:v:20:y:2021:i:2:p:165-191
    DOI: 10.1177/0972652720969519
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    References listed on IDEAS

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    More about this item

    Keywords

    Sukuk; conventional bond; yield spread; liquidity;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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