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Israel Benchmark Bonds Decline Mirroring U.S. Treasuries

Jan. 29 (Bloomberg) -- Israel’s benchmark government bonds fell, pushing the yield up for a third day, pacing similar maturity U.S. Treasuries. The government sold its first 30-year dollar-denominated bonds in New York for the first time in more than a decade.

The yield on the 4.25 percent Mimshal Shiklit maturing March 2023 increased two basis points, or 0.02 percentage point, to 4.03 percent at 1:52 p.m. in Tel Aviv. Israel raised $2 billion of dollar-denominated bonds, including 30-year notes last sold in December 1998, as the government took advantage of its lowest-ever international borrowing costs.

U.S. 10-year yields yesterday were about four basis points from the highest level since April as Federal Reserve policy makers prepare to start a two-day meeting today. Israeli government bonds tend to track debt in the U.S., one of the nation’s biggest trading partners.

“As long as yields in the U.S. remain stable in the higher range we won’t see yields drop here,” Shuki Arditi, a trader at Leader Capital Markets Ltd. in Tel Aviv said today by phone.

Israel raised $2 billion in its bond sale yesterday in New York, the Finance Ministry said in an e-mailed statement today. The sale included $1 billion of 10-year notes priced to yield 3.213 percent and 30-year debt priced to yield 4.588 percent, the cheapest-ever yields in dollar bonds, according to the ministry.

Shows Faith

“This shows the markets have faith in the government,” Ori Greenfeld, macro economist at Psagot Investment House Ltd., said today by phone from Tel Aviv. “The issue enables the government to lower the amount of debt raised in Israel and if there isn’t a major deviation from the budget target, we expect easier terms in the bond market.”

Last week’s elections delivered Benjamin Netanyahu a third term as prime minister. Netanyahu seeks to trim the budget deficit to 3 percent of economic output this year from 4.2 percent in 2012, requiring 14 billion shekels ($3.8 billion) in spending cuts.

The shekel was little changed at 3.7277 to the dollar after the central bank left its benchmark interest rate unchanged at 1.75 percent yesterday after markets closed. All 22 economists surveyed by Bloomberg forecast the decision.

The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, gained less than one percent to 282.35 today.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

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

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