Dubai/Toronto:  Prices of comparable sukuk and bonds analysed by Fitch Ratings maintained a strong correlation through 2025 and into mid-January 2026, continuing the pattern of the past seven years, despite occasional brief periods of volatility when correlations diverged. Average yield spreads between comparable sukuk and bonds were tighter for investment-grade issuers than for speculative-grade issuers.

Fitch analysed the pricing of 54 sukuk and bonds issued by the same entities. The issuers were predominantly investment-grade (85%), and were primarily from Saudi Arabia (44.4%), followed by Indonesia (26%), UAE (14.8%) and Turkiye (7.4%), with Bahrain and Oman each at 3.7%. Most were sovereigns (59%), followed by corporates (22%) and international public finance entities (19%). The majority of the analysed instruments (85%) were denominated in US dollars, followed by the Indonesian rupiah (11%) and the UAE dirham (4%).

Sukuk and bond pricing across all the analysed cases in 2025 had strong yield-to-maturity (YTM) correlation of 0.97 (on a scale of 0 to 1) on average, although correlation dipped briefly in some cases in early 2Q25. The movement is consistent with the trend from 2019 to mid-January 2026, when average YTM correlation was 0.97. The YTM spreads between comparable sukuk and bonds also narrowed by 2bp in 2025, with the average spread tightening to -0.06%, from -0.08% in 2024, in line with the 2019 to mid-January 2026 average of -0.08%.

From 2019 to mid-January 2026, sukuk yielded on average less than comparable bonds in 59% of cases, with similar yields in 15% of the cases, and higher yields than bonds in 26% of cases.

YTM spreads for investment-grade issuers were minimal, averaging -0.04% from 2019 to mid-January 2026 and -0.05% in 2025 (2024: -0.07%). In contrast, speculative-grade issuers had wider spreads, averaging -0.39% over the full period and -0.11% in 2025 (2024: -0.10%). This was also accompanied by stronger and more stable correlations for investment-grade issuers (0.97 on average over the full period), and slightly lower long-term correlations for speculative-grade issuers (0.95). This indicates deeper liquidity for investment-grade issuers, while speculative-grade issuers could have a more concentrated investor base and thinner secondary-market liquidity, causing price divergence.

These findings offer insights into how investors price credit risk across sukuk and bonds, although sukuk structures are more complex than those of bonds. Directly comparable sukuk and bonds sharing similar payment priority, issuance, maturity dates and currency remain limited, more so for speculative-grade issuers.

Sukuk pricing may potentially reflect market developments more slowly than bonds, given the buy-and-hold nature of many sukuk investors, particularly Islamic banks, an effect that may be more pronounced for speculative-grade issuers. Fitch will continue to monitor the pricing relationship in light of evolving sharia-compliance requirements, geopolitical volatilities, and broader macroeconomic developments.

Fitch’s analysis of the YTM for the S&P MENA Sukuk Index and the S&P MENA Bonds Index showed a high correlation of 0.99 over the five years to mid-January 2026. The average YTM differential between the indices was -27bp over the period, with sukuk yields generally lower than bond yields.

Contact:
Bashar Al Natoor
Managing Director – Global Head of Islamic Finance
bashar.alnatoor@fitchratings.com
Fitch Ratings – Dubai Branch
Maze Tower, 18th Floor
Sheikh Zayed Road, P.O. Box 215584, Dubai, U.A.E.

Amjad Alkabra
Senior Analyst – Islamic Finance
amjad.alkabra@fitchratings.com

Mohammed Alkhaja
Associate Analyst – Islamic Finance
mohammed.alkhaja@fitchratings.com

Saif Shawqi, CFA, FRM
Director – Islamic Finance
saif.shawqi@fitchratings.com

Media Relations: Shahd Alsheikh, Riyadh, Email: shahd.alsheikh@thefitchgroup.com
Peter Hoflich, Singapore, Email: peter.hoflich@thefitchgroup.com

Additional information is available on www.fitchratings.com