Bloomberg News

Israel 2022 Bond Rises a 10th Day on Growth Concern, Europe Debt

October 05, 2011

Oct. 5 (Bloomberg) -- Israel’s 2022 bond rose for a 10th day, pushing the yield to the lowest since it was sold, on concern economic growth will be hurt by Europe even as the region’s policy makers look for ways to stem the debt crisis.

The yield on the 5.5 percent Mimshal Shiklit government notes due January 2022 fell one basis point, or 0.01 percentage point, to 4.53 percent at the 4:30 p.m. close in Tel Aviv. The rate swung between gains and losses as the International Monetary Fund said European Union officials are working on plans to boost bank capital. The rate on the 10-year securities has dropped 31 basis points in the past 10 days.

“It’s still unclear what the depth of European intervention will be and how determined and swift the injection of liquidity to the banking system will be,” said Amir Haik, chief economist at Union Bank of Israel in Tel Aviv. “All of the markets are very volatile.”

The global economic recovery is still tentative and Israel continues to grapple with fallout from the world financial crisis, the Bank of Israel said in a report today. Governor Stanley Fischer, who had raised rates for more than two years, reversed policy on Sept. 26 and cut the key rate by a quarter percentage point to 3 percent, citing the worsening global economic outlook.

Shekel Gains

The shekel was little changed at 3.7382 against the dollar. The currency has dropped 3.6 percent in the past 12 months, the best performer among 10 emerging markets in Europe, the Middle East and Africa tracked by Bloomberg.

Two-year interest-rate swaps, an indicator of investor expectations for rates over the period, increased one basis point to 2.73 percent. The two-year breakeven rate, which reflects market expectations for inflation over the period, gained for the first time in four days, gaining three basis points to 179, implying an average annual inflation rate of 1.79 percent.

Consumer prices may rise 2.3 percent in the next 12 months, according to the average of forecasters surveyed by the Bank of Israel, the bank said Sept. 20. Inflation-linked bonds due June 2013 rose for the first time in four days, lowering the yield four basis points to 1.15 percent.

The Tel-Bond 40 index of corporate bonds snapped a three- day drop, gaining 0.3 percent.

--Editors: Claudia Maedler, Shanthy Nambiar

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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