Israel Bonds Gain as Shekel Climbs on Leiderman’s BoI Nomination

Israel’s benchmark bonds rose for the first time in three days and the shekel gained after Leonardo Leiderman, chief economist of the country’s largest bank, was nominated as the next Bank of Israel governor.

The yield on Israel’s 4.25 percent benchmark bonds due March 2023 fell two basis points, or 0.02 percentage point to 3.73 percent at 12:38 p.m. in Tel Aviv. The shekel strengthened 0.3 percent to 3.5552 a dollar, headed for the highest close since May 9. The currency has appreciated 5 percent this year, the best performer among 31 major currencies tracked by Bloomberg.

Leiderman, 62, chief economist at Tel Aviv-based Bank Hapoalim, was picked to succeed Stanley Fischer, who stepped down June 30. First-choice Jacob Frenkel withdrew his candidacy this week. Interim Governor Karnit Flug immediately resigned after being passed over for a second time by Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid.

“The quick nomination is a relief to the market, removing uncertainty after the withdrawal of Frenkel,” said Sagie Poznerson, head of trading at Leader Capital Markets (LDRC) in Tel Aviv. “Leiderman has a good track record of monetary theory and has worked within the central bank before.”

The former head of the central bank’s research department, Leiderman must still be vetted by a panel that reviews senior civil appointments, and the cabinet. Frenkel’s nomination snagged while the committee was reviewing his candidacy after Haaretz newspaper reported that seven years ago he was briefly detained in Hong Kong after leaving an airport shop with an item that had not been purchased.

The Bank of Israel this week kept interest rates at 1.25 percent. In May, the regulator lowered the benchmark rate by 0.5 percentage point in two cuts aimed at trimming the shekel’s advance and supporting the economy, which relies on exports for about 40 percent of output.

Economic growth will probably slow to 3.2 percent in 2014 from 3.8 percent this year, the central bank said June 24. Indicators suggest “continued growth of economic activity at the relatively moderate pace of the past two years, which eased concerns of an additional slowdown,” the central bank said

this week.

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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