Negative Real Yield and Sovereign Sukuk

Negative Real Rates Have Reached the Shores of Many Countries Across the Globe.

Our Islamic finance industry is not immune. The question is, how many sovereigns have issued local denominated Sukuk for which the yield has been strongly negative throughout 2021? It is interesting that not much is there about linking negative real yield to Sukuk and inflation.

First, let us point out that real yield is the annualized return that a benchmark government bond/Sukuk facility generates once inflation is taken into account. Here is what I found about the Kingdom of Saudi Arabia (KSA).

Funding CostIn principle, we need to examine inflation as a funding cost. Naturally, inflation impacts the currency of the investment because of relative pu...