Israel Picks Goldman, Barclays, Citi in Roadshow; Bonds Gain

Israel picked Goldman Sachs Group Inc., Barclays Plc and Citigroup Inc. as underwriters before meetings with potential bond investors in Europe and U.S. Its government bonds rallied most among developed markets.

Officials from the ministry’s debt management unit will present Israel’s economy and debt structure to the investors next week to “ensure quick access to international markets in 2013,” the ministry said in an e-mailed statement today. The nation’s 4.25 percent 10-year bonds rose for a second day, sending the yield down five basis points, or 0.05 percentage point, the most among 23 similar-maturity notes from developed markets, to 3.99 percent, data compiled by Bloomberg show.

The plan comes amid calls by Bank of Israel Governor Stanley Fischer for the government to rein in the budget deficit, which he estimated was 4.2 percent of economic output in 2012, more than double the target. Prime Minister Benjamin Netanyahu called for early elections, scheduled for Jan. 22, citing opposition to his budget plan.

“This will be the cheapest funding ever for the government,” Eyal Klein, chief strategist at Israel Brokerage & Investments Ltd., said today by phone from Tel Aviv. This year “will be a challenging year for the government and it makes sense to lock-in cheap money now.”

Early Elections

The yield on the government’s 4 percent dollar-denominated bonds due June 2022 was little changed at 2.99 percent at 3:56 p.m. in Tel Aviv, after falling to a record 2.94 percent Dec. 17, data compiled by Bloomberg show. The country is rated A1 at Moody’s Investors Service, the fifth-highest investment grade.

The cost of insuring Israel’s debt against default for five years dropped 63 basis points, or 0.63 percentage point, last year to 135, before trading at 127 basis points yesterday, according to data compiled by Bloomberg. Lower prices signal improving perceptions of a borrower’s creditworthiness. The contracts pay the buyer face value in exchange for the underlying securities or cash if a borrower fails to adhere to its debt agreements.

Israel is seeking to raise as much as $1.5 billion in foreign bonds in order to diversify funding sources, Globes reported last month. The country sold $1.5 billion of 10-year bonds in January 2012, its first overseas offering in three years. The bonds have handed investors 13.4 percent since then, compared with a return of 4.5 percent in 2012 for the Bank of America Merrill Lynch Global Broad Market sovereign Plus Index.

“Non-deal road shows are taking place to enable access to markets,” the Finance Ministry said yesterday in an e-mailed answer to questions from Bloomberg News. The accountant general’s office is studying a “foreign issuance as part of its yearly work plan,” the ministry said.

Before it's here, it's on the Bloomberg Terminal.