Israel’s benchmark government bonds rose, pushing the yield to a three-month low, and the shekel gained after U.S. lawmakers agreed to raise the country’s debt limit and avert a default, increasing investors’ risk appetite.
The yield on the 4.25 percent securities due March 2023 dropped 10 basis points, or 0.10 percentage point, to 3.65 percent, matching the level on July 22 at the close in Tel Aviv. The yield on the 4.25 percent bonds maturing August 2016 fell nine basis points to 1.54 percent, the lowest since the notes started trading in January 2011. The shekel rose for a second day, advancing 0.4 percent to 3.5294 a dollar.
President Barack Obama signed into law a measure ending the 16-day government shutdown and extending the nation’s borrowing authority until early next year. A U.S. default could harm the Israeli economy, Israel’s Intelligence and Strategic Affairs Minister Yuval Steinitz said Oct. 14. Exports make up 34 percent of the country’s economy, with the U.S. and Europe being the main trading partners.
“The fear factor and uncertainty caused by the U.S. debt impasse are lifted, bringing back investors to the debt market,” Yshai Shilo, a fixed-income broker at Tel Aviv-based I.B.I.-Israel Brokerage & Investments, said by phone. “We expect the inflow to continue next week as it will be revealed who will be the next Bank of Israel governor.”
Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid met last night to discuss contenders for the central bank governor position and agreed to announce a choice by Sunday. Previous Governor Stanley Fischer left at the end of June. His deputy, Karnit Flug, is currently acting central bank governor.
U.S. Treasury 10-year note yields fell five basis points on speculation the Federal Reserve will maintain its bond-buying program into next year after the government shutdown weighed on economic growth.