Israel on Tuesday launched its first international bond sale since the Oct. 7 Hamas attacks and since Moody’s hit the country with its first ever sovereign credit rating downgrade last month.
According to an investor presentation, Israel will sell bonds with maturities of 5, 10 and 30 years at “benchmark” size – usually at least $500 million dollars – with proceeds to be used for general budgetary purposes.
A Finance Ministry source said the overall size of the offering had not yet been determined, but analysts at Morgan Stanley estimated it would be $4-6 billion due to Israel’s “significant funding needs”.
BlueBay analyst Tim Ash said the sale would be an “interesting test” of investor appetite in the wake of the war that has seen Israel’s army pummel Gaza, killing more than 30,000 Palestinians.
The war was triggered after Hamas attacks on Israel, in which 1,200 were killed and 253 taken hostage, according to Israeli tallies.
Guidance provided by Israel’s bankers said the five-year bonds would be sold with an interest rate roughly 160 basis points higher than those on U.S. government bonds. Ten-year bonds would be Treasuries plus 175 basis points, with 30-year bonds at Treasuries plus 205 basis points.
Israel’s five-year bonds currently yield 4.2%, 10-year ones are at 4.19% and 30-year ones yield 4.33%. BNP Paribas, BofA Securities, Deutsche Bank and Goldman Sachs & Co are bookrunners for the offering.
While most of Israel’s bonds and those issued by its big companies have recovered in price terms from post-October attack sell-offs, the impact remains substantial.
The government’s bonds have underperformed the most widely-followed global emerging market bond index by just over 10 percentage points over the last six months and Moody’s cut the country’s credit rating last month.
Danish pension fund AkademikerPensions, which claims to be the world’s strictest on human rights violations, excluded 13 Israeli companies from its investment list in January too, on the basis of their connection to Israeli settlements in the occupied West Bank.
