10 things to know about Israel’s bond market

Bank Hapoalim’s fixed-income desk, gives The Jerusalem Post 10 facts worth knowing about Israel’s thriving bond market.

By NIV ELIS
Gateway to Israel logo370 (photo credit: Courtesy)
Gateway to Israel logo370
(photo credit: Courtesy)
The volatility of stock markets in the years of the global economic crisis have brought renewed interest in bonds, which are thought of as safer but lower yield investments.
Ilan Buchbut, who heads Bank Hapoalim’s fixed-income desk, gave The Jerusalem Post 10 facts worth knowing about Israel’s thriving bond market: 1) Bond trading represents 81 percent of market trade. Forty-five series of government bonds (including Treasury bills) are traded on Israel’s bond market, comprising a market value of NIS 600 billion, while 737 different series of corporate bonds are worth NIS 277b.
2) Government bonds represent the bulk of trade, with a daily turnover of NIS 4.5b., versus NIS 770 million for corporate bonds.
3) Bonds are differentiated on the basis of whether they are denominated at a fixed or floating rate, and they are linked to a foreign-currency index.
4) Among government bonds, there is a greater proportion of fixed-rate, shekel-denominated bonds. Among corporate bonds, there are more foreign-currency, index-linked bonds.
5) In the first 10 months of 2013, the government issued NIS 56.5b.
of bonds, 72% of which were shekel-denominated, and the rest were linked to the consumer-price index.
6) In the first 10 months of 2013, 128 corporate bonds were issued for a total value of NIS 26.2b., about half of which were new series and the rest extensions.
7) In the first nine months of 2013, foreign investors collected $2.5b. more from government bonds than they invested.
8) Government bond yields are at historically low levels, mainly due to the low interest-rate environment and low inflation expectations.
Corporate-bond yields are also historically low, as is the spread between the two.
9) Since the beginning of 2013, government-bond indices increased moderately at a rate of about 3.0%, compared with a rise of about 5.5% in the corporate-bond market.
10) The primary factor affecting the local bond market today is volatility from the US bond market.This article was produced in conjunction with Bank Hapoalim.