IILM sukuk sale tests market depth

Kuala Lumpur-based International Islamic Liquidity Management Corporation has raised $1.475 billion through a US dollar-denominated short-term sukuk auction, marking its largest single issuance since its first auction in August 2013 and underscoring the continuing depth of demand for high-quality Islamic liquidity instruments.

The auction was 2.07 times oversubscribed, with bids reaching $3.05 billion even as investors weighed geopolitical tensions, shifting expectations on US interest rates and uneven liquidity across global debt markets. The sale also marked the first time IILM offered a six-tenor structure in one auction, covering two-week, one-month, two-month, three-month, six-month and nine-month maturities.

The scale of the transaction places IILM at the centre of a stronger phase for short-term Islamic money-market instruments, where banks and institutional investors are seeking liquid, Sharia-compliant assets that can help manage balance-sheet needs without taking longer-duration exposure. For Islamic financial institutions, such paper plays a role similar to treasury bills or high-grade commercial paper in conventional markets, providing a tool for cash deployment, collateral management and regulatory liquidity buffers.

Mohamad Safri Shahul Hamid, chief executive officer of IILM, described the sale as a major step in the organisation’s evolution, noting that the six-tenor format expanded choice across the short end of the yield curve. The broader message from the auction was that investors remained willing to absorb sizeable short-dated Islamic paper where credit quality, regular issuance and secondary-market familiarity were present.

The transaction brings IILM’s year-to-date issuance in 2026 to $10.795 billion across 43 sukuk series, strengthening its position as one of the most active global issuers of short-term Sharia-compliant instruments. Its sukuk programme, rated A-1 by S&P Global Ratings and F1 by Fitch Ratings, has an $8.5 billion ceiling, giving the institution room to maintain monthly auctions and respond to changing liquidity requirements among Islamic banks and institutional investors.

IILM was established on 25 October 2010 by central banks, monetary authorities and multilateral organisations to improve cross-border liquidity management for institutions offering Islamic financial services. Headquartered in Kuala Lumpur and hosted by Malaysia, it has built its model around highly rated underlying assets and repeat issuance, allowing dealers and investors to price its sukuk as a regular benchmark in the Islamic money market.

The organisation’s governing board includes central banks and monetary agencies from Indonesia, Kuwait, Malaysia, Mauritius, Nigeria, Qatar, Türkiye and the United Arab Emirates, along with the Islamic Corporation for the Development of the Private Sector. That shareholder base has helped position IILM as a multilateral platform rather than a single-market issuer, a feature that matters in a sector still working to deepen standardised liquidity instruments across jurisdictions.

Demand for the auction also reflects the wider expansion of the sukuk market. Global issuance rose in 2025 and entered 2026 with strong momentum, supported by funding needs in core Islamic finance markets, diversification by sovereigns and corporates, and investor appetite for instruments linked to real assets and transparent structures. At the same time, market conditions have not been straightforward. Geopolitical risk in the Middle East, uncertainty over the timing of US rate cuts and changes in risk appetite have produced sharper pricing discipline across fixed-income markets.

Against that backdrop, short-tenor sukuk have become more attractive for institutions seeking flexibility. The two-week and one-month tranches appeal to banks managing immediate cash positions, while the six-month and nine-month maturities offer a way to lock in returns without committing to longer-dated securities. The inclusion of a two-month tranche adds another point on the maturity curve, improving the usefulness of IILM paper for treasury desks with precise liquidity targets.

Primary dealers remain central to the distribution of IILM sukuk. Its network includes major Islamic and conventional banking groups across the Gulf, Malaysia, Türkiye and the United Kingdom, giving the instruments access to a broad institutional investor base. Regular auctions have also helped create a clearer reference point for pricing short-term Islamic liquidity, an area where the market has historically lacked the depth available in conventional money markets.