Sukuk Securities: New Ways of Debt Contracting

CHAPTER 7 Sukuk Securities and Conventional Bonds

In order to investigate the possible existence of a difference between the yield to maturity (YTM) of sukuk securities and the YTM of conventional bonds for the same duration and same issuer, pair-sampled t-tests have been conducted. These tests were performed on maturities ranging from three months to 20 years from various types of issuers in Malaysia: (1) sovereign, or government (the government of Malaysia and Bank Negara Malaysia), (2) quasi-sovereign, or government agencies (Cagamas, a mortgage company, and Khazanah Nasional, the investment-holding arm of the government), (3) financial institutions (AAA rated), and (4) corporations (corporate-guaranteed AAA and corporate AAA). YTM data for the first working day of each month from August 2005 to January 2011 were collected from the BondStream database, a product of Malaysia’s Bond Pricing Agency.

The tests found that the mean yield of sukuk securities for all types of issuers and all forms of maturities was 4.02 percent. However, the YTM varied from 2.83 percent (sukuk securities issued by BNM with three months’ maturity) to 5.87 percent (sukuk securities issued by AAA-rated corporations with 20 years’ maturity).

The mean yield of conventional bonds for all types of issuers and all forms of maturities was also 4.02 percent, and the range was from 2.82 percent (conventional bills issued by BNM with three months’ maturity) to 5.76 percent (conventional bonds issued by AAA-rated ...