(photo credit: Bloomberg)
The yield on Israel’s 10-year government bond declined for a fourth day on
Sunday, amid expectations for higher interest rates over the next year as the
central bank seeks to return inflation to the government’s target
The yield has dropped 10 basis points since the Bank of Israel
unexpectedly raised the base lending rate by a half-percentage point to 3
percent on March 28 as inflation accelerated and growth surged. It was the first
increase of its size since 2005 and put the rate at the highest level since
November 2008. February prices jumped an annual 4.2%, the most in more than two
years, and above the 1% to 3% target for the second month.
“The market is
still recovering from the big rate increase and is pricing in inflation
expectations,” Assaf Rosenberg, a trader at Excellence Nessuah Investment House
Ltd., said by telephone. “Consumer prices are expected to rise over the next
three or four months, but there is uncertainty about how much the central bank
will lift borrowing costs.” The benchmark Mimshal Shiklit bond due January 2020
gained, pushing the yield down 1 basis point to 5.25 percent at the 4:30 p.m.
close in Tel Aviv.
Governor Stanley Fischer will likely raise the rate
another two times by 25 basis points each, bringing the benchmark rate to 4% by
year end, Rosenberg said.
The economy will grow at a faster pace this
year than previously estimated, the central bank said March 30, revising its
growth forecast to 4.5% from 3.8%.
Growth accelerated to an annualized
7.7% in the fourth quarter as exports, fixed investment and consumer spending
climbed, the Central Bureau of Statistics said on March 10.
strengthened 0.4% to 3.4646 per dollar on April 1, the highest level since
October 2008. (Bloomberg)