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Israel Yield Drops Tracking U.S. as Leiderman Pulls Governor Bid

Israel’s 2023 government bonds rose the most in two weeks after U.S. jobs data eased bets for an early tapering of Federal Reserve stimulus and as Leonardo Leiderman withdrew his candidacy to be Bank of Israel governor.

The yield on Israel’s benchmark 4.25 percent bonds maturing in March 2023 fell four basis points, or 0.04 percentage point to 3.76 percent at the close in Tel Aviv. U.S. Treasury 10-year note yields slumped 11 basis points on Aug. 2 after employers added fewer workers than forecast in July as the world’s largest economy struggles to gain momentum. Israel relies on exports to markets, including the U.S., for 40 percent of gross domestic product.

Local debt buying hasn’t been affected today by the withdrawal of Leiderman as the nominee to be Bank of Israel governor, the second candidate to drop out in a week, said Yshai Shilo, a fixed-income broker at Tel Aviv-based I.B.I.-Israel Brokerage & Investments. Karnit Flug will act as interim governor until a replacement is named.

“The debt market is today tracking the big drop in Treasury yields over the weekend,” said Shilo. “For the moment there is no panic in the market as Flug is left in charge.”

Leiderman, 62, chief economist at Tel Aviv-based Bank Hapoalim Ltd., was last week picked to succeed Stanley Fischer, who stepped down June 30. The nomination came after first-choice Jacob Frenkel withdrew his candidacy.

Avoid Embarrassment

“We are all obligated to continue to do our work to ensure the Bank of Israel will continue to fulfill its important tasks properly,” Flug said in a letter to central bank staff.

The government should check candidates “very well” to avoid more embarrassment and name a new governor as quickly as possible, central bank monetary policy committee member Reuben Gronau said today.

The shekel weakened to the lowest this month on Aug. 2. Israel’s five-year credit-default swaps rose 0.33 basis points to 109.66, the highest level since July 15, according to prices compiled by CMA. The credit risk gained 276 basis points last week, the biggest since the five days ending June 21.

The Bank of Israel last 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.

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