Although stocks have grabbed most of the headlines this year as the TA-25 index continues to set new highs, bond performance has also been nothing to sneeze at. "2005 was the year of bonds," said Dorit Salinger, CEO of Maalot, the Israeli credit rating agency that is affiliated with US ratings agency Standard & Poor's. In 2006, she expects a change in focus from a market of issuers to a market that is more oriented towards investors. The majority of bonds issued in 2005 were for the purpose of recycling loans. "This year issues were used to lower the costs of funding and to improve debt structure," said Salinger. Cheap interest rates this year have induced more and more companies to issue debt at convenient terms. More than 70 Israeli companies issued bonds this year. "There is a lot of money around seeking investment. As the financial situation has been improving, companies will in the coming year be seeking to raise money for the purpose of growth," said Salinger. "The estimated interest rate level of 5% will still be at a relative low level for companies to make offerings and seek non-banking sources of finance." On a macroeconomic level, Maalot forecasts 2006 investment growth within the business sector with GDP growth of 4.3% and an inflation rate ranging between 1% and the 3% ceiling. As power shifts from the banks to insurance companies as a result of the sale of mutual and provident funds to insurance companies, the market will see banks and other financial bodies introducing new formats and financial structures, she said. "The gradual implementation of the capital market reforms and other regulatory reforms will lead to greater competition in the financial sector, particularly to growth in the non-banking sector," Salinger noted. She added that in the first quarter of 2006 the Israeli market will, for the first time, see the start of the issue of mortgage-backed bonds - a security that is based on a pool of underlying mortgage loans. "In the coming year, we will also see a continuation of municipal bond offerings," she said. Municipal bonds are debt securities issued by a municipality, state or county to finance its capital expenditures - often for the construction of roads, schools or bridges. Issuing municipal bonds offers a way to vary funding sources and reduce dependence on the banks. Israel's first harbinger of the trend came from the Ramle Municipality, which raised NIS 140m in bonds in the second half of 2005. Currently, Maalot issues credit ratings on 200 Israeli companies and structures. The company analyzes the credit quality of over 80% of debentures issued on the Israeli primary market.