In a historic move, Israel successfully sold $8 billion worth of international bonds, marking the nation’s largest sale of dollar notes to date and signaling a triumphant return to global markets amidst the ongoing conflict with Hamas.
The government’s bond issuance included $2 billion in notes maturing in five years, $3 billion in 10-year bonds, and an additional $3 billion in 30-year notes, as disclosed by individuals familiar with the matter. The offering garnered an overwhelming response, with at least $34 billion in investor demand, highlighting robust support for Israel’s financial initiatives during the conflict with the designated terrorist organization, Hamas.
Uday Patnaik, Head of EM Fixed Income at Legal & General Investment Management Ltd., commented, “Israel faces significant funding needs this year due to the war,” indicating the potential for further bond issuances.
Despite the conflict, Israel is anticipated to achieve a near-record level of bond sales this year, encompassing a combination of local and global securities. Notably, this public offering marks Israel’s first in global markets since the commencement of the conflict.
The pricing details revealed that the shortest-maturity notes yielded 135 basis points over Treasuries, a notable improvement from the initial guidance of around 160 basis points. The 10-year and 30-year portions of the deal were priced with yields of 145 and 175 basis points over Treasuries, respectively.
Orders during the offering favored the longer end of the curve, according to sources familiar with the matter. Leading financial institutions, including Bank of America Merrill Lynch, BNP Paribas SA, Deutsche Bank AG, and Goldman Sachs Group Inc., managed Israel’s groundbreaking bond sale.
The conflict has undoubtedly impacted the Israeli economy, with the war initially causing disruptions. However, as Israel navigates through these challenges, the strong demand for its international bonds reflects confidence in the nation’s economic resilience. The shekel’s robust performance and the decline in government’s average dollar yields further indicate investor confidence.
While concerns persist in certain market segments, as evidenced by elevated credit-default swaps, Israel’s credit rating experienced a downgrade by Moody’s Investors Service in February. Nevertheless, the country maintains its status well within investment-grade territory, comparable to nations like Iceland and Chile.