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.

Israel will meet with European investors this week as the country seeksto sell euro-denominated bonds for the first time in more than fouryears, Accountant-General Shuki Oren said.
The government hiredBarclays Capital, Goldman Sachs Group and Morgan Stanley for the sale,the Finance Ministry said in an e-mailed statement. Oren will meet withEuropean investors starting Wednesday, a banker involved in thetransaction said.
“Israel will seek a benchmark offering of atleast €1 billion, but I expect the book to be very strong and theoffering to be even bigger,” Eyal Klein, a former Finance Ministrydirector 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.
Inthe country’s latest issuance abroad, a $1.5b. offering of 10-yeardollar-denominated bonds a year ago, was priced to yield 262.5 basispoints more than Treasuries of similar maturity. Oren told Bloomberg inan interview on November 2 the next sale would be in euros to diversifythe country’s currency exposure.
The euro-bonds sale might helpIsraeli companies raise money abroad, Finance Minister Yuval Steinitzsaid in an interview Monday after addressing a Knesset committee.
Whilethe timing and amount of the bond issuance would depend on marketconditions, the country’s economic standing is strong, he said.
“Isee importance in this not only in raising money to cover the deficit,but I see added value in it,” Steinitz said. “When Israeli governmentbonds are traded on Wall Street or in Europe, this gives a boost toinvestments in Israel and to issuances of Israeli corporations that areraising money in the same markets.”
Israel’s gross domesticproduct grew an annualized 4.4 percent in the fourth quarter afterexpanding 3% in the previous three months. Bank of Israel GovernorStanley Fischer raised the benchmark interest rate at the end ofDecember by a quarter-point to 1.25%, his third increase since theeconomic recovery began.
“I expect huge demand and pricing thatwill match the solid standing of Israel’s economy,” Klein said. Thecountry’s growth rate is among the highest in the Western world, hesaid.
The pricing for the bonds will probably be more than 100 basis points lower than Greece’s last issuance, Klein said.
Greecesold 10-year bonds last Thursday after Prime Minister George Papandreoupromised to reduce Europe’s largest budget deficit by cutting wages.The government priced the notes at 300 basis points more than themid-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 byMoody’s.
The price on Israel’s Eurobond due in 2015 was littlechanged on Monday, yielding 3.37% by 4:07 p.m. in Tel Aviv, accordingto Bloomberg Bondtrader composite prices. That compares with a yield of3.29% 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%.