How are indices bringing greater transparency to Saudi Arabia’s sukuk and fixed income markets? S&P DJI’s Jessica Tan joins GCMA’s Michael Grifferty for a closer look at the trends driving the evolution of these markets and how index-based tools are helping market participants evaluate the region’s opportunity set.
[TRANSCRIPT]
Michael Grifferty:
Hello, and welcome to our session on understanding the iBoxx Tadawul Riyal Government Sukuk and Bond Index and the iBoxx Tadawul SAR Government Sukuk Index Series. My name is Michael Grifferty, President of the GCMA, and I'm here with Jessica Tan of S&P Dow Jones Indices.
Jessica Tan:
Hello, Michael.
Michael Grifferty:
So what is inside the iBoxx Tadawul Riyal Government Sukuk and Bond Index and how does it gain us a better understanding of the fixed income landscape?
Jessica Tan:
So the iBoxx Tadawul Riyal Government Sukuk and Bond Index captures the riyal-denominated sukuk and bonds issued by the Saudi government in the Saudi market. The index serves as a benchmark for domestic and global investors to monitor the pricing, yields and performance of the Saudi debt market itself.
Michael Grifferty:
Terrific. How has the composition of the sukuk market changed since the launch of the iBoxx index several years ago?
Jessica Tan:
So the index was launched in 2020, with the sukuk index having history going back to 2019, and at the beginning, in 2020, the weight of the conventional bond compared to the sukuk proportion within the index was actually about 30% to 70% in terms of ratio. And as of Q3 2025, what we have seen is that that conventional bond weight within the index actually dropped below 3%. And that shift shows the Saudi government's commitment to the local sukuk program, as the market itself has actually tripled in size, but the conventional bond issuances have actually been less of a focus for the Saudi government.
Michael Grifferty:
Well, what kind of initiatives and steps has the Saudi government taken to further develop the market?
Jessica Tan:
So from my perspective, the Saudi government has actually taken a two-pronged approach to actually develop the domestic debt market. The first category of their approach, I will categorize this, would be their goal to actually improve the accessibility and liquidity of the market. And how they are doing it is actually through the primary dealer program, where they work with domestic banks as well as global banks to actually help to broaden their investor base. Secondly, they are also tapping on existing issuances rather than issuing new issuances so that they can provide sukuk issuances in the market that are actually big enough for each individual sukuk, that's enough scale for investors to invest into.
And then the second category that I would categorize their approach, their objective under would be their goal to actually provide transparency over the debt market. So what they have done is actually, build up a comprehensive yield curve, covering all different tenors for investors to actually have a benchmark, a yield curve benchmark to refer to. And also they designate different sukuk for different tenors as on-the-run issues so that there's a reference point for investors in the market to look to.
Michael Grifferty:
Interesting. How does the iBoxx Tadawul Government & Agencies Sukuk Index differ from the iBoxx Tadawul Government Saudi Riyal Index in terms of composition and utilization?
Jessica Tan:
So the iBoxx Tadawul Saudi Riyal Government Sukuk Index only captures Saudi riyal-denominated government sukuk, while the iBoxx Tadawul Government & Agencies Sukuk Index captures both Saudi riyal-denominated sukuk issued by the government and USD-denominated sukuk issued by government and agencies issuers within the Saudi Arabian market.
So, in terms of the weight within the iBoxx Tadawul Government & Agencies Sukuk Index, it's about 80% in Saudi riyal-denominated sukuk, and 20% of the remaining weight is in USD-denominated, government and agencies sukuk. So, that gives it a performance that's sort of aligned with the iBoxx Tadawul Saudi Riyal Government Sukuk Index while giving it some diversification benefits from the USD proportion of the index itself. So in terms of investors using the benchmark, it can actually help them to monitor the public sector financing conditions of the Saudi market.
Michael Grifferty:
How do the iBoxx Tadawul SAR Government Sukuk Indices help investors to better understand the landscape and progress of the Saudi market?
Jessica Tan:
So the index series comes with different maturity bands in terms of sub-indices. So there's 1-3, 3-5, etc. in terms of the indices that investors can refer to to look at the performance of different tenors, as well as because it captures all of the government sukuk that meets the minimum amount outstanding criteria, it gives investors a benchmark in terms of the yield curve of how the yield pricing and performance trend within the market itself over different times. Especially during market events, it's meaningful to look at the performance, the yield performance, in terms of how they react to different market events. And so this is a good monitor for those domestic and global investors investing in the Saudi riyal sukuk market.
Michael Grifferty:
Thank you very much, Jessica.
Jessica Tan:
Thank you, Michael.
