Israel Sells Record $1 Billion Retail-Like Bonds Since War Began

Galit Altstein
·3-min read

(Bloomberg) -- There’s been a sharp rise in demand for retail-like bonds bought by Israel’s supporters across the world since the war with Hamas began a month ago, according to Israel Bonds.

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Israel Bonds, which is registered in the US and separate but affiliated to the Ministry of Finance, has sold more than $1 billion of bonds since Oct. 7. That’s a record for a monthly period and has almost doubled the organization’s issuance for the year so far.

There has been the “highest surge of investment ever,” Dani Naveh, chief executive officer of Israel Bonds, said to Bloomberg. “This demonstrates the strong support for Israel.”

Israel Bonds is part of New York-based broker-dealer Development Corp. for Israel and was established in 1951 by former Prime Minister David Ben Gurion. Its securities are fully backed by the Israeli government, according to its website, and demand often rises during times of conflict. That was the case in 2014, when Israel was last engaged in a major fight with Hamas. Sales also spiked during the 1967 Six Day War and the 1973 Yom Kippur War.

Ukraine experienced a similar increase in demand for its bonds when Russia invaded last year.

Israel Bonds account for roughly one-third of the country’s issuance in foreign currencies.

There’s little sign the war will end soon, despite rising pressure on Israel to pause fighting. Israel has been bombarding Gaza, a Mediterranean enclave ruled by Hamas, since the group’s militants swarmed southern Israeli communities, killing 1,400 people. More than 10,000 people have been killed in Gaza due to the Israeli airstrikes and a subsequent ground invasion, according to the Hamas-run health ministry in the territory.

Hamas is backed by Iran and designated a terrorist organization by the US and European Union.

Israeli assets, including its local-currency and dollar bonds, dropped heavily last month as traders fretted the war would spread to other countries in the region and about the economic toll on Israel. JPMorgan Chase & Co. predicts Israel’s gross domestic product will shrink 11% this quarter on an annualized basis.

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But the shekel and Israel’s bonds have risen in the past 10 days amid a global relief rally and some signs the fighting will largely be contained to Gaza.

In addition to the Israel Bonds, the government has issued private placements since the war began. It has sold 1.8 billion euros ($1.9 billion) of three-year notes with a 5% coupon via Goldman Sachs Group Inc., according to data compiled by Bloomberg. It also printed $800 million of eight-year debt, the sale of which was managed by the same bank, with a coupon of 6.5%.

Israel Bonds are retail-liked instruments that don’t have a secondary market, meaning they are difficult to trade. They are sold with names such as “Mazel Tov” and “Maccabee” bonds and pay roughly the same as Israeli dollar Eurobonds, the yields on which average 6.3%, according to Bloomberg indexes. They can be bought in denominations of as little as $36.

“Our economy has a record of quick resilience after war and I am confident that this time will be no exception,” said Naveh. “If the Hamas regime in Gaza is dismantled Israel will be strong, not just from the security point of view, but also from the economic point of view.”

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