Israel has reportedly returned back to the international debt markets, with a new sale of Eurobonds in multiple tranches. This is its first global fundraising attempt since the Gaza ceasefire almost three months ago.
The government has been heavily reliant on domestic borrowing for a long time to fund the increased defence and security expenditures during the war.
Bloomberg reported that the deal aims to raise a few billion dollars. It follows a series investor meetings in the US, Europe and Asia.
Officials involved in this process said that feedback from investors worldwide has been positive. This led Israel to expand the structure and maturity of the sale.
The move highlights the shift to overseas funding following months of record issuance in the United States.
Global markets are back in focus
Bloomberg reports that the Eurobond sale includes maturities as long as five, 10 and 30 years.
Israeli officials met with dozens of institutional investors in major financial hubs before the offering to gauge demand and refine prices.
The five-year notes have a spread of about 120 basis points compared to US Treasuries.
The 10-year tranche is shown at approximately 130 basis points while the 30-year bond is shown at approximately 150 basis points above the benchmark.
Israel last tapped the global debt markets last February, when it raised 5 billion dollars through 5- and 10-year bonds.
The inclusion of the 30-year tranche in this sale is a response to investor demand for longer maturities. This will add duration to Israel’s external credit profile.
War-driven borrowing surge
Israel’s return on the global markets comes after a period of exceptional debt triggered by a two-year war with Hamas that also affected other fronts including Iran and Lebanon.
The war has inflated defence expenditures and changed the government’s financing needs.
Bloomberg reports that Benjamin Netanyahu’s government has embarked on an unprecedented borrowing programme, which will total nearly 280 billion Shekels (or about $89 billion) by 2024.
The majority of this issuance was consumed by the domestic markets, which limited Israel’s engagement with foreign investors during the heights of the war.
The amount of borrowing last year is expected to have been more than 200 billion shekels. This would be among the highest annual amounts in decades, excluding Covid-19 pandemic.
Credit Risk Signals Stabilized
In recent months, market measures that track Israel’s sovereign risks have shown signs of improvement.
Investors commonly use five-year credit default swaps to hedge against default risks. Prices have fallen to around 70 points.
This is a sharp drop from the peak of August 2024 when the concerns about the conflict and fiscal strains were at their height.
The decline in the price of oil suggests that investors are less concerned about their near-term future stress levels, as the ceasefire is still in place.
Israel’s sovereign debt status remains under scrutiny despite the stabilisation of market indicators.
During the war all three major rating companies downgraded Israel’s rating by two notch, citing increased geopolitical risks and fiscal risks.
S&P changed Israel’s rating outlook from negative to stable in November.
Moody’s has maintained a negative outlook, reflecting the ongoing concerns about debt levels and regional security.
This post Israel tests investors’ appetite with first Eurobond sales since Gaza ceasefire could be modified as new developments unfold.
This site is for entertainment only. Click here to read more
