Prices of comparable sukuk and bonds maintained a strong correlation through 2025 and into mid-January 2026, continuing a seven-year pattern despite occasional brief periods of volatility, Fitch Ratings said on February 4.

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 at 85%, and were primarily from Saudi Arabia at 44.4%, followed by Indonesia at 26%, the UAE at 14.8% and Turkey at 7.4%, with Bahrain and Oman each at 3.7%. Most were sovereigns at 59%, followed by corporates at 22% and international public finance entities at 19%.

The majority of the analysed instruments at 85% were denominated in US dollars, followed by the Indonesian rupiah at 11% and the UAE dirham at 4%.

Sukuk and bond pricing across all the analysed cases in 2025 had strong yield-to-maturity correlation of 0.97 on average, although correlation dipped briefly in some cases in early second quarter 2025. 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 2 basis points 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 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. In contrast, speculative-grade issuers had wider spreads, averaging -0.39% over the full period and -0.11% in 2025.

This was accompanied by stronger and more stable correlations for investment-grade issuers at 0.97 on average over the full period, and slightly lower long-term correlations for speculative-grade issuers at 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.

Fitch said sukuk pricing may 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'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.