DUAL-MARKET BOND DYNAMICS: COMPARATIVE ANALYSIS OF ISLAMIC AND CONVENTIONAL SHORT- AND LONG-TERM INSTRUMENTS AMID SHIFTING MONETARY POLICIES

Abstract

This study examines the yield dynamics of Malaysian sovereign bonds, focusing on short-and long-term instruments and the distinctions between conventional bonds and Islamic bonds (sukuk) during the dynamic period from 2019 to 2025. This study first analyzes how short- and long-term bond yields respond to monetary policy changes and then compares the yield behaviors of bonds and sukuk across these categories. This study employed a combination of descriptive statistics, regression analysis, and t-tests on data from Malaysian sovereign debt instruments. The findings reveal that both short-term bonds and sukuk are highly sensitive to interest rate changes, reflecting their role as immediate indicators of monetary policy shifts. In contrast, long-term bonds are more responsive to inflation expectations and GDP growth, which aligns with theories of long-term yield dynamics. Notably, no statistically significant difference in returns is observed between conventional bonds and sukuk, suggesting similar performance in terms of yields. Amid dynamic market conditions, evolving policies, and the unique challenges faced by emerging economies such as Malaysia, particularly those with dual-market structures, these findings validate existing theories and provide critical insights for policymakers, investors, and researchers, especially in the context of dual-bond markets during periods of market volatility.