Fixed Income Instruments: Sukuk, Bonds, and Money Market Instruments
This domain tests whether you understand what backs each fixed-income instrument, where it trades, and how its return is calculated. Questions often require you to distinguish a project-based participatory bond from a sukuk, or to annualise a discount yield.
The instrument family
- اوراق مشارکت (participatory bonds) finance a named project with a fixed coupon and scheduled principal repayment; issuers include the government, municipalities and corporates.
- Islamic Treasury Bills (اوراق خزانه اسلامی, colloquially اخزا) are short-dated discount government paper, actively traded on the IFB.
- Sukuk structures include ijara, murabaha, musharaka, istisna, wakala and manfa'a. Each must be tied to a real asset, usufruct or service, with returns flowing from that underlying rather than from a loan.
- Money market instruments include deposit certificates, treasury bills and central bank paper used for liquidity management.
Issuance and governance
Structures are reviewed by the SEO's Sharia committee; corporate issues normally require a credit rating, an underwriter and a trustee (امانتدار) representing holders.
Pricing
Discount instruments are quoted below face value; the return is the discount annualised over the remaining term. Coupon instruments are priced from yield, with accrued interest separating clean and dirty price.
Worked example
A treasury bill with face value 1,000,000 rials matures in four months and is bought at 960,000. Discount = 40,000; period return = 40,000 ÷ 960,000 = 4.1667%. Annualised ≈ 4.1667% × 12 ÷ 4 = 12.5%. The investor's realised return depends on holding to maturity; selling early exposes them to price risk.
Traps that cost marks
Treating sukuk as plain credit bonds and ignoring the asset and SPV structure; annualising using calendar days inconsistently; assuming treasury bills carry no price risk before maturity; confusing nominal coupon with effective yield.