Israel seeks to offer euro-bonds

Accountant-General Shuki Oren will meet with European investors this week; Israel last sold bonds in euros in October 2005, raising €750 million.

By DAVID WAINER, SONJA CHEUNG, ALISA ODENHEIMER /
March 9, 2010 06:52
2 minute read.
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euros 311. (photo credit: .)

 
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Israel will meet with European investors this week as the country seeks to sell euro-denominated bonds for the first time in more than four years, Accountant-General Shuki Oren said.

The government hired Barclays Capital, Goldman Sachs Group and Morgan Stanley for the sale, the Finance Ministry said in an e-mailed statement. Oren will meet with European investors starting Wednesday, a banker involved in the transaction said.

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“Israel will seek a benchmark offering of at least €1 billion, but I expect the book to be very strong and the offering to be even bigger,” Eyal Klein, a former Finance Ministry director for external debt and chief strategist at Israel Brokerage & Investments, said. “This is going to happen sometime this week.”

Israel last sold bonds in euros in October 2005, raising €750 million.

In the country’s latest issuance abroad, a $1.5b. offering of 10-year dollar-denominated bonds a year ago, was priced to yield 262.5 basis points more than Treasuries of similar maturity. Oren told Bloomberg in an interview on November 2 the next sale would be in euros to diversify the country’s currency exposure.

The euro-bonds sale might help Israeli companies raise money abroad, Finance Minister Yuval Steinitz said in an interview Monday after addressing a Knesset committee.

While the timing and amount of the bond issuance would depend on market conditions, the country’s economic standing is strong, he said.

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“I see importance in this not only in raising money to cover the deficit, but I see added value in it,” Steinitz said. “When Israeli government bonds are traded on Wall Street or in Europe, this gives a boost to investments in Israel and to issuances of Israeli corporations that are raising money in the same markets.”

Israel’s gross domestic product grew an annualized 4.4 percent in the fourth quarter after expanding 3% in the previous three months. Bank of Israel Governor Stanley Fischer raised the benchmark interest rate at the end of December by a quarter-point to 1.25%, his third increase since the economic recovery began.

“I expect huge demand and pricing that will match the solid standing of Israel’s economy,” Klein said. The country’s growth rate is among the highest in the Western world, he said.

The pricing for the bonds will probably be more than 100 basis points lower than Greece’s last issuance, Klein said.

Greece sold 10-year bonds last Thursday after Prime Minister George Papandreou promised to reduce Europe’s largest budget deficit by cutting wages. The government priced the notes at 300 basis points more than the mid-swap rate, or a yield of 6.35%.

Israel’s debt is rated A1, the fifth-highest investment-grade status, at Moody’s Investors Service. Greece is rated one step lower at A2 by Moody’s.

The price on Israel’s Eurobond due in 2015 was little changed on Monday, yielding 3.37% by 4:07 p.m. in Tel Aviv, according to Bloomberg Bondtrader composite prices. That compares with a yield of 3.29% at the start of December.

The price on Israel’s dollar bond due in 2019 fell $0.13 to $103.06, pushing the yield up two basis points to 4.71%.

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