Israel Goes on First Billions-Worth Bond Sale Spree Since Hamas War
11:11 GMT 06.03.2024 (Updated: 12:34 GMT 06.03.2024)
© AFP 2023 / JACK GUEZ
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Numerous woes have been plaguing Israel’s economy in the wake of Hamas’ attack last October that triggered a new spiral of the Palestine-Israel conflict. The GDP shrank by over 19 percent in annualized terms in the final quarter of 2023, and Moody's Investors Service lowered Israel's credit rating from A1 to A2 in February.
Israel has sold its first batch of international dollar bonds in the public market since it unleashed its war on Hamas.
In a bid to shore up badly needed funds, Israel issued $8 billion worth of bonds. The transaction featured $2 billion in notes maturing in five years, $3 billion in bonds due in 10 years, and $3 billion in notes due in 30 years, according to sources cited by Bloomberg. The size of the bond issuance makes it Israel’s biggest sale of dollar notes on record.
The shortest-maturity notes were reportedly priced with a yield of 135 basis points over US Treasuries. The 10-year debt and 30-year debt notes were priced with a yield of 145 and 175 basis points over Treasuries, respectively, according to the outlet.
The transaction was handled by Goldman Sachs Group Inc., BNP Paribas SA, Bank of America Merrill Lynch, and Deutsche Bank AG. Before the current bond sell-off, Israel had been issuing foreign-currency bonds through private placements since the Hamas conflict began.
“Israel has significant funding needs this year given the war. I wouldn’t be surprised if they need to issue more,” Uday Patnaik, head of EM fixed income at Legal & General Investment Mgmt Ltd., was cited as saying.
It is anticipated that Israel will sell almost a record amount of local and global securities this year.
Screenshot showing Bloomberg chart as Israel sells first public dollar bonds since Hamas war.
© Photo : Bloomberg
Israel's average dollar yields are currently hovering at around 5.7% after peaking at 6.5%. While experts suggest this indicates a degree of investor confidence, the price of Israel's credit default swaps (CDS) remains elevated. CDS measures the cost of insuring the Israeli government against a default.
🇮🇱📉 Israel’s economy declines by nearly 20% since outbreak of Gaza war
— Sputnik (@SputnikInt) February 19, 2024
The Jewish state’s GDP contracted by 19.4% during the final three months of 2023, according to Israel’s Central Bureau of Statistics.
Some of the woes facing the Israeli economy include the mass evacuation… pic.twitter.com/y7pGmD8xit
The ongoing spiral of the Palestine-Israel conflict has battered the Israeli economy and affected everything from commerce to tourism.
Moody’s Investors Service slashed the Israeli government’s rating by one level to A2 in February, marking the country’s first-ever downgrade. It also kept Israel's credit outlook "negative." Nevertheless, Israel's current rating remains investment grade.
“The ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel, as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future,” the credit rating agency noted in a statement.
Israel’s economic downturn ‘ultimately direct or indirect implication’ of Gaza war
— Sputnik (@SputnikInt) February 21, 2024
Tel Aviv’s ongoing military campaign in the Gaza Strip and the psychological impact of this conflict on Israeli society have directly contributed to the country’s recent economic decline, says Dr.… pic.twitter.com/dKmkNdpMki
Following the surprise attack by Hamas on October 7, 2023, the stock market plunged to its lowest point in over two and a half years, with Israeli government bond prices plummeting. However, the Bank of Israel took aggressive action with interventions to support the shekel. Over the pas months, the local currency has persistently rallied.
But the economy has taken a hard hit, with Central Bureau of Statistics figures showing a 19.4 percent decline in GDP between October to December, 2023, highlighting the fallout on investment and trade, productivity, and consumer spending.
According to projections by the Bank of Israel, the conflict is expected to cost Tel Aviv around 255 billion shekels ($70.3 billion) by the end of 2025 - equivalent to around 13% of GDP.
