Israel set for international bond offering, likely in euros

Israel is prepared to tap international markets for a benchmark-sized sovereign debt offering in 2021 with the timing and size still to be determined and dependent on market conditions, the country’s accountant-general said.

The issue will most likely be euro-denominated after large dollar-denominated offerings in 2020. Israel typically alternates between dollar and euro every year, and the bonds typically attract a huge number of foreigners, thanks to the country’s relatively strong economy.

“We do both dollar and euro but right now the euro market is more attractive,” Accountant-General

Yali Rothenberg said in response to a question from Reuters on bond issues.

There will, however, be fewer issues this year than in 2020, when the government had to issue a record amount of bonds to fund its pandemic stimulus plan, he said.

In January 2020, prior to the coronavirus outbreak, Israel raised $3 billion in foreign debt in a sale of 10- and 30-year bonds that attracted demand of some $20b. from investors.

Three months later it sold $1b. of 100-year bonds, or “century bonds”, in international markets as part of a record $5b. fundraising to help cope with the health crisis.

Barclays, Bank of

America

Securities, Citibank and Goldman Sachs underwrote the bond issue. Demand was $25b.

Including a 40-year “Formosa” issue in Taiwan for $5b. and private placements of €5.6b. ($6.7b.), Israel in 2020 raised more than NIS 74b. ($23b.) in international markets last year, a level Rothenberg called “enormous” and not typical.

“It’s not going to be the numbers that we saw in 2020, because we are back to a more sustainable kind of issuance regime,” he said. “We’ll do benchmark sizes, probably this year, and we’re considering the timing.”

He said Israel has already chosen bankers but they have not been disclosed.

“Whenever we decide, we can do this in a day and a half,” he said. “It always depends on the market environment because the bread and butter is local issuances. So, we can afford to be boutique and choose the right timing.”

Standard & Poor’s rates Israel’s sovereign debt at “AA-” while Moody’s Investors Service rates Israel at “A1” and Fitch Ratings at “A+.”

Israel spent more than NIS 100b. in 2020 to cope with the pandemic, resulting in a ratio of debt to gross domestic product of 72.4% – up from 60% in 2019 but well below the average of developed countries of 125%. (Reuters)