Israel CPI Bonds Drop on Corporate Sale Bets; Shekel Declines

Israel’s inflation-linked government bonds dropped, pushing yields higher for a third day, as investors sought corporate debt amid optimism local holding companies are selling assets to pay off creditors.

The yield on the 1 percent consumer-price linked bonds due May 2017, rose two basis points to 0.42 percent at 1:22 p.m. in Tel Aviv. The Tel Aviv Bond 40 Index, which measures inflation- linked and fixed-rate corporate bonds, rose less than 0.1 percent, poised for the highest close since Bloomberg began tracking the gauge in February 2008. The yield on Discount Investment (DISI) Corp’s 5 percent bonds due April 2016 fell 23 basis points to 1.66 percent, the lowest since May.

Given Imaging Ltd. (GIVN), an Israeli maker of a capsule-sized camera for diagnosing digestive ailments, which is in part held indirectly by Israeli tycoon Nochi Dankner’s IDB Holding Corp. (IDBH) via Discount Investment, is exploring strategic alternatives including a possible sale. IDB has been selling assets and seeking investment as the company strives to avoid default. TheMarker reported Oct. 10 that York Capital Management is buying bonds to get control of IDB Development Corp., the parent company of Discount Investment.

“Investors are buying into riskier corporate debt on signs that the large holding companies are going to start to sell assets and are getting investment to pay off commitments,” said Oren Ossad, a trader at Excellence Nessuah Investment House Ltd., in Ramat Gan, Israel.

The yield on the 5.5 percent Mimshal Shiklit bonds due January 2022 was unchanged after climbing three basis points yesterday to 4.14 percent.

The shekel depreciated 0.4 percent to 3.8130 a dollar, trimming the advance for the month to 2.8 percent. The two-year break-even rate, the yield difference between the inflation- linked bond and fixed-rate government bonds of similar maturity, fell 10 basis points to 243, implying an average annual inflation rate of 2.43 percent.

One-year interest rate swaps, an indicator of investor expectations for the benchmark rate in the period, was unchanged at 2.15 percent.

To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net

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

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