Bayside Land 2026 Yield Rises to 5-Month High Before Debt Tender

Bayside Land Corp. bonds fell, pushing the yield to a five-month high, as investors trimmed holdings in the debt of the Israeli commercial real-estate developer before a note sale to institutions today.

The yield on Bayside’s 176 million shekels ($48 million) of 4.75 percent notes due March 2026, soared 33 basis points, or 0.33 percentage points, to 4.87 percent at the close in Tel Aviv, the highest since Oct. 29. Shares gained for the first time in three days, rising 1.8 percent to 748.30 shekels. The yield on Israel’s 4.25 percent benchmark government bonds due March 2023 was unchanged at 4.01 percent.

Bayside Land, indirectly held by debt-strapped IDB Holding Corp., seeks to raise as much as 250 million shekels from a sale of the 2026 notes which were rated ilA+, the fifth-highest investment grade, at Standard & Poor’s Maalot on March 17. The company’s profit more than doubled in 2012 to 196.8 million shekels compared with the year-ago period as revenue increased.

“Demand at the tender can be expected to be strong,” Adar Etzioni, head of research at Migdal Capital Markets Ltd., said by phone from Tel Aviv. “There is high demand for low-yield corporate debt and the company is seeking funds to finance projects in Israel and redistribute debt.”

Rate Outlook

The bonds in the tender are priced at a minimum 118 shekels per unit, according to Clal Finance Underwriting Ltd. Each unit consists of 100 shekels principal amount of notes. Moody’s Midroog assigned an Aa3 rating to the debt. The Bank of Israel has gradually reduced its borrowing rate to 1.75 percent from 3.25 percent in 2011 increasing demand for higher-yielding assets.

Five out of 20 analysts in a Bloomberg survey expect the central bank to cut interest rates by 25 basis points to 1.5 percent at its March 24 meeting. The remainder expect no change. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, fell less than one basis point to 1.60 percent.

The two-year break-even rate, the yield difference between the inflation-linked bonds and fixed-rate government notes of similar maturity, advanced six basis points to 257, implying an average annual inflation rate of 2.57 percent over the period. The Tel-Bond 40 Index of corporate bonds was little changed at 283.77.

The shekel gained 0.1 percent to 3.6844 a dollar at 4:53 p.m. in Tel Aviv. The currency strengthened 0.8 percent so far this month, the third-best performer among 31 major currencies tracked by Bloomberg.

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