BoI mulls equities holdings boost

The Bank of Israel is studying whether to increase the equities holdings in its foreign exchange reserves portfolio and also invest in corporate bonds below investment grade, its deputy governor said.

Speaking at a Euroclear conference on Sunday, the bank’s Andrew Abir said Israel’s forex reserves were about 60% invested in government bonds and 15% in stocks – mainly US shares but also small amounts in the UK, France, Germany, Japan, Canada and other countries.

Though the pandemic has taken a toll on global equities prices, Abir said the bank has continued to manage its reserves with a long- term view.

Israel’s forex reserves stand at a record high of $ 161b., up from less than $ 30b. in 2007. Until 2012 the reserves were invested largely in government bonds to maintain high liquidity.

However, Abir said the central bank now places greater emphasis on the portfolio’s yield, with about 7% invested in corporate bonds – the maximum allowed.

He said the BoI was looking at investing in additional assets, including a low level of corporate bonds that are below investment grade.

“While investment in volatile assets may lead to losses in the short term, the high level of the reserves makes it possible to absorb short- term losses without harming the Bank of Israel’s ability to provide foreign exchange to the economy at the required scale during emergencies or financial crises,” he said. ( Reuters)