Israel Bonds Rise Most in 2 Weeks on Debt Bets; Shekel Falls

Israeli bonds rose the most in almost two weeks, pushing 10-year yields down for the first time in four days, after U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank may expand bond purchases.

Bonds also advanced as investors bet Bank of Israel Governor Stanley Fischer will be able to contain inflation after raising borrowing costs six times to 2 percent. The yield on the benchmark 5 percent Mimshal Shiklit due January 2020 dropped 2 basis points to 4.63 percent at the 4:30 p.m. close in Tel Aviv, the biggest decline since Nov. 23.

“The Fed comments have mainly a psychological impact in the local market as investors believe he is going to keep supporting the bond market in the U.S.,” said Amir Kahanovich, an economist at Clal Finance Investment Management Ltd. in Tel Aviv. “While inflation expectations are high here, Fischer’s credibility has been able to keep them from going out of control.”

The inflation rate climbed to 2.5 percent in October from 2.4 percent the previous month. Consumer prices are expected to rise 2.8 percent in the next 12 months, according to the average of forecasters surveyed by the Bank of Israel, the bank said Nov. 16. The target range is 1 percent to 3 percent.

The shekel weakened 0.2 percent to 3.6308 per dollar at 5:03 p.m. in Tel Aviv. The Bank of Israel bought about $150 million to weaken the currency, said Tom Gerszbejn, a trader at Union Bank of Israel Ltd. in Tel Aviv. A Bank of Israel spokesman declined to comment. Earlier today the shekel gained for a fifth day, climbing as much as 0.4 percent.

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