Israeli Bonds Fall as Stocks Gain on ECB Bank Repayment Outlook
Israel’s benchmark government bonds fell, pushing the yield up the most in a week, as investors turned to riskier assets including equities after the European Central Bank said banks plan to repay more loans than forecast.
The yield on the 4.25 percent securities maturing March 2023 increased five basis points, or 0.05 percentage point, the most since Jan. 17, to 4.01 percent at 12:28 p.m. in Tel Aviv. The TA-25 Index (TA-25) of stocks rose 0.6 percent.
Treasuries fell the most since September on Jan. 25 after the ECB said banks will pay back 137.2 billion euros ($184.7 billion) of its three-year loans next week. That surpassed the 84 billion-euro median forecast in a Bloomberg News survey of all of the 21 analysts. Israeli government bonds tend to track debt in the U.S., one of the nation’s biggest trading partners. The government’s 5.5 percent 2022 securities also declined today, sending the yield up five basis points to 3.77 percent.
“Investors are switching to riskier assets on prospects the debt crisis is abating and stability is coming back to the global economy,” Shuki Arditi, a bond trader at Leader Capital Markets Ltd. in Tel Aviv, said by phone. “The positive momentum is pushing Israeli yields up today.”
A recovery in the global economy would support Israel, which derives 40 percent of its gross domestic product from exports. Economic growth slowed to 3.3 percent last year from 4.6 percent in 2011, according to the Central Bureau of Statistics.
To spur economic growth, the central bank lowered the key interest rate by 25 basis points to 1.75 percent last month. The regulator may leave borrowing costs unchanged tomorrow, according to all of of 21 analysts surveyed by Bloomberg. One- year interest-rate swaps, an indicator of investor expectations for rates over the period, rose one basis point to 1.74 percent, on Jan. 25.
Annual inflation, which unexpectedly accelerated to 1.6 percent in December from 1.4 percent a month earlier, may average 2.11 percent in the next two years, according to the two-year breakeven rate. The rate, which reflects the yield difference between the inflation-linked bonds and similar- maturity fixed-rate government debt, rose for first time since Jan. 21, adding two basis points to 211.
Israel’s shekel weakened 0.3 percent to 3.7215 to the dollar on Jan. 25, trimming this month’s advance to 0.3 percent. The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, fell 0.1 percent to 282.10 today.
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