The historic 2013 US Israel Bonds sales effort – which resulted in domestic
sales exceeding $1.12 billion – dispelled any lingering notions regarding the
wisdom of investing in Israel bonds. The achievement underscored widespread
acceptance of Israel bonds as important additions to investment portfolios and
dispelled, once and for all, outdated misconceptions of Israel bonds as
Putting the record year – an unparalleled success in both real
and nominal terms – into perspective, 2013 domestic sales were 38 percent above
last year’s total of $816 million and nearly 80% more than the $633m. realized
Notably, surpassing $1.12b. in US domestic sales occurred in a
year without major conflict, countering the perception that Israel bonds are
bought in great numbers only when Israel confronts a national emergency. On the
contrary, the record-breaking year can be attributed to recognition of the value
of investing in Israel bonds, and, especially, confidence in the Israeli
economy. The accomplishments of 2013 highlight the success the Bonds
organization has had in shifting the narrative from the geopolitical to the
Every day, Israel Bonds emphasizes the message that Israel’s
economy is dynamic, full of innovative spirit and groundbreaking
entrepreneurship. It is a message that has resonated with Israel Bonds clients
from across the spectrum who invest in Israel bonds to become stakeholders in
one of the world’s most resilient economies.
Indeed, Israel’s economy is
well-positioned to continue outpacing most other developed nations, particularly
with the multi-billion dollar revenue stream soon to be generated through its
massive natural gas fields.
The record sales of 2013 further solidified
the reputation of Israel Bonds as a dependable economic resource for Israel.
While Israel successfully utilizes the public markets for debt financing, it
almost certainly would not be able to rely solely on these markets in times of
economic or security challenge. Under either of those circumstances, it is more
than likely Israel’s credit rating would drop, and, as a result, the cost of
financing through capital markets would become excessive.
needed international financial assistance during a crisis, there is only one
country it could truly rely on, and that is the United States. Nonetheless,
America’s current economic difficulties and debt burden would make it
challenging for the US to reinstitute a significant civilian aid program for
Israel. So for Israel to know it can always turn to Israel Bonds under all
circumstances positions the organization as a vital national asset.
addition to its proven reliability in securing capital, the Bonds organization
is cost-effective. The two-, three-, five- and 10-year securities currently sold
by Israel Bonds average out to a duration of approximately 4.5 years, and an
average interest rate of approximately 2%. Also, operational costs of the
worldwide Israel Bonds enterprise – just over 2.8% of bonds sold – compare
favorably when measured against similar- sized brokerage firms.
the Bonds organization is comprised of a professional team with a unique skill
set. Similar to the personnel of leading financial firms, Israel Bonds’ human
capital is a valuable corporate resource. This is particularly true in times of
conflict. Losing the Bonds sales and management team and subsequently attempting
to recreate it during a national emergency would take at least 18 months due to
financial industry regulations and required examinations.
idea of Israel trying to weather an economic and security crisis for 18 months
And, were a crisis to erupt, it is unlikely an
independent brokerage firm would be able to secure capital from the Jewish
community – and additional sources of support – as effectively as the Bonds
organization. Israel Bonds also has the advantage of its lay leadership, which,
through networking and introductions, helps facilitate numerous
Throughout the years, Israel Bonds has successfully
developed a sizable, diverse client base even the largest financial services
would envy. Were Israel not to have access to this client base and urgently need
to reestablish it, the cost of securing necessary interim credit lines from
commercial banks would be quite substantial.
Regional conflict could also
lead to credit lines not being extended to Israel.
The Israel Bonds
client base is augmented by high-profile institutional investors – states,
municipalities, banks, insurance companies, other financial institutions and
more. In addition to their investments, the immediate name recognition
institutional investors provide gives Bonds retail clients assurance they are
acquiring a wise investment.
Israel Bonds also allows its retail clients
– the individuals and Jewish organizations comprising approximately 75% of
worldwide annual sales – greater ease of access when purchasing bonds than what
is typically offered by the capital bond market, and Israel bond investments can
also be made online. The Bonds e-commerce site has been exceptionally successful
since its fall 2011 launch, with sales currently approaching $50m., comprising
more than 8,400 online investors and over 17,000 bondholders.
value-added aspect of investing in Israel bonds is the powerful statement it
sends to Israel’s adversaries, especially the Boycott, Divestment and Sanctions
(BDS) movement. Knowing Israel will never be defeated on the battlefield, BDS
supporters employ confrontational economic tactics on a wide variety of
Yet, each and every Israel bond investment sends an unmistakable
message to BDS advocates: Israel’s economy will remain strong. In 2013, with
over $1.12b. in domestic US sales, that message was particularly
In sum, the above points reinforce the fact that for Israel to
have the support of Israel Bonds – a dedicated, independent financial pipeline –
is without a doubt an indispensable strategic national resource, especially
since Bonds clients have proven time and again that when Israel faces
challenges, they do not walk away.
The writer is president & CEO of
the Development Corporation for Israel/ Israel Bonds.