Israeli Gov’t Bonds Set to Be Included in Citigroup Index

(Reuters/Nir Elias/File Photo)

The dollar recovered just a bit on Friday, rising 0.14 percent over Thursday’s close to trade at NIS 3.635/dollar – but the Israeli currency is likely to appreciate much more in the coming weeks, according to business publication Bizportal. That’s because Israel is set to be included soon in an international bond index that economists expect to attract large investments to Israeli government-issued bonds – and further pressure on the shekel to appreciate, as even more foreign currency chases shekels.

The Citigroup World Government Bond Index (WGBI) measures the sovereign debt of 22 of the most advanced economies in the world. According to a report that Bizportal said will be issued by Citigroup next week, Israeli bonds are very close to meeting the criteria required for listing in the index – an annual bond market value of over $50 billion, 40 billion euros, and 2.5 trillion yen. In recent months, Israel has surpassed the criteria in euro and yen, and is about $2 billion away from the dollar amount. That gap is set to be closed in the coming months, according to the study, as the government is set to issue another bond offering worth NIS 3.2 billion ($900 million) by the end of March.

Entry of Israel into the WGBI, according to the report, will attract more investors to Israeli government securities. “Israeli bonds have long been on the radar of investors, and as soon as the dollar amount of bonds will meet our criteria, we estimate that it will not take long to include Israel in the index,” it said.

Bizportal quoted officials in the Finance Ministry as expressing hesitation at the prospect of Israel’s inclusion in the index. According to the officials, the Bank of Israel would likely prefer not to have Israel listed in the index, as it will bring more investor money into the economy – as much as $2 billion – as Israel would be weighted at between 0.2 percent and 0.3 percent of the WGBI’s $3 trillion value. But the decision is Citigroup’s, the bank’s report said. “We realize that including Israel in the index is likely to strengthen the shekel even further,” the report said. “It remains to be seen how the Bank of Israel will deal with this.”

The further pressure on the shekel comes after last week’s buyout of Mobileye by Intel, a deal which will stream billions of dollars into Israel. According to foreign currency trading experts FXCM Israel, “the Mobileye deal is likely to attract more investors to Israel,” as the “smart money” seeks out other Israeli tech investments. “The rush of investments is likely to further increase the value of the shekel,” the firm said, citing what it calls the “Mobileye Effect, which has been raising consciousness among investors around the world in the wake of the biggest tech deal in Israel’s history, and in Intel’s history as well.”

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