Sukuk liquidity and creditworthiness during COVID-19

Mariya Gubareva, Tatiana Sokolova, Zaghum Umar and Xuan Vinh Vo

The Quarterly Review of Economics and Finance, 2024, vol. 94, issue C, 88-92

Abstract: This paper presents the empirical liquidity study of Islamic fixed-income securities during 2020–2021. Using bid-ask and Z-spread metrics we demonstrate that the apogee of both, liquidity and credit stresses in international sukuk market is reached in early April 2020. Contrasting results for non-Islamic fixed-income instruments, we show that sukuk credit spreads recover to pre-Covid levels faster than their bid-ask spreads. However, we find that the share of liquidity component in the yield spread of sukuks always remains below 1%, revealing that Covid-19 does not worsen in relative terms the economic attractiveness of this financing channel for Shariah-concerned entities and investors.

Keywords: COVID-19 pandemic; Liquidity; Sukuk; Fixed-income; Bid-ask spread; Z-spread (search for similar items in EconPapers)
JEL-codes: E44 F3 G10 G11 G12 G15 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:94:y:2024:i:c:p:88-92

DOI: 10.1016/j.qref.2024.01.001

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