Israel Bonds Rise to Record as Growth Data Boosts Risk Demand
Israel’s benchmark government bonds climbed for a fifth day, pushing the yield to the lowest level since they were issued in April, as improved manufacturing output around the world boosted demand for riskier assets.
The yield on the 5.5 percent bonds due in January 2022 dropped two basis points, or 0.02 percentage point, to 4.47 percent, at 1:51 p.m. in Tel Aviv. The Bank of Israel today sold 11 billion shekels ($2.88 billion) of short-term Makam bills at average yields below the previous sale. The shekel gained for the first time in three days, increasing 0.3 percent to 3.8084 a dollar as the greenback weakened against all 16 major currencies tracked by Bloomberg.
Australian manufacturing expanded for the first time in six months in December, an industry survey showed, adding to evidence the global economy is improving after German and Chinese factory output reports beat economist estimates in the past two days. Data later today may show U.S. manufacturing rose at the fastest pace in six months in December, according to a survey of economists’ forecasts compiled by Bloomberg.
“Positive sentiment surrounding global economies is contributing to a decline in the risk premium of Israeli assets and boosting appetite for higher-yielding assets,” said Ehud Itzhakov, a bond trader at Bank Hapoalim Ltd. in Tel Aviv. “Institutional investors are looking for buying opportunities in the market after two weeks that the Finance Ministry hasn’t had a bond auction.”
The Finance Ministry last sold bonds on Dec. 19 and its first scheduled sale of 2012 will be Jan. 9 when it plans to auction 1.5 billion shekels of debt, including the government’s first 30-year bond.
The Bank of Israel today sold 2 billion shekels of 91-day short-term notes, or Makam bills, at an average yield of 2.58 percent and 9 billion shekels of 364-day bills at an average yield of 2.51 percent. That compares with respective average yields of 2.7 percent and 2.8 percent, at the last auction of similar-maturity securities on Dec. 6.
The yield on the inflation-linked bonds due June 2013 declined for a third day, falling four basis points to 0.64 percent. The two-year break-even rate, the difference between inflation-linked bonds and similar-maturity fixed-rate government debt, dropped three basis points to 191, implying an average annual inflation rate of 1.91 percent.
Two-year interest-rate swaps (ISSW2), an indicator of investor expectations for rates over the period, retreated four basis points to 2.48 percent. The central bank on Dec. 26 left the benchmark interest rate unchanged at 2.75 percent, after reducing it twice in three months, saying it wants to be able to react to future developments.
The Tel-Bond 40 Index (TEL-B40) of corporate bonds rose for an eighth day, gaining 0.3 percent to 261.13.
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