Israel Yields Rise as Stronger Global Economy Whets Risk Hunger

Israel’s 2022 government bonds fell, lifting yields for the first time in three days, as investors turned to riskier assets amid a rise in U.S. bond yields and a recovery of global economies.

The yield on the 5.5 percent benchmark government bonds due in 2022 gained five basis points, or 0.05 percentage point, to 3.78 percent at the close in Tel Aviv. The benchmark TA-25 Index of stocks rose 1.1 percent.

“Yields are rising abroad and there is a mood for riskier assets because global economies are improving,” Ori Greenfeld, macro economist at Psagot Investment House Ltd., said today by phone. “People are selling bonds and moving to shares or corporate bonds.”

Thirty-year Treasuries fell, extending a January decline that almost wiped out 2012’s gain, as money managers prepared to bid at a $13 billion auction of the securities today, the last of three debt sales this week. European Central Bank policy makers today kept interest rates on hold as improving economic sentiment underpinned expectations of a gradual recovery this year.

The Bank of Israel, led by Governor Stanley Fischer, cut its benchmark interest rate last month to the lowest level in more than two years to boost economic growth, which it estimates may have slowed to 3.3 percent in 2012 from 4.6 percent in the previous year. “Investors assume there is less pressure on the central bank to cut interest rates,” Greenfeld said.

Corporate Sales

One-year interest-rate swaps, an indicator of investor expectations for borrowing costs over the period, advanced 2.4 basis points to 1.725 percent. The shekel gained 0.3 percent to 3.7691 per dollar at 4:40 p.m. in Tel Aviv.

The two-year break-even rate, the difference between yields on inflation-linked bonds and fixed-rate government notes of similar maturity, retreated five basis points to 205, implying an average annual inflation rate of 2.05 percent over the period. The government’s price target range is between 1 percent and 3 percent.

The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, declined 0.1 percent to 281.96. Avgol Industries announced the private institutional placement of as much as 22.5 million shekels of its Series B bonds. Israel Aerospace Industries said it raised 1.2 billion shekels in a sale of its series Gimmel notes.