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Friday, February 1, 2013

A Pretty Savvy Move In My Opinion By The Central Bank of Israel...WIth the Assistance of Goldman Sachs

I'll leave others to make a judgement


The 10.5-year and 30-year bonds will help the treasury close the projected giant hole in the government's 2013 and 2014 budgets.
Some $1 billion worth of 10.5 year bonds were issued, with a yield of 3.213 percent, 125 basis points above the United States's Federal Reserve rate for 10-year treasury bonds.
Another $1 billion worth of 30-year bonds were issued with a yield of 4.588 percent, some 145 basis points above the Fed rate for 30-year treasury bonds.
Investor demand for the bond issues exceeded $9 billion, some 4.5 times the actual amount issued. In response to the high demand from large strategic investors, Israel's treasury decided to issue more 30-year bonds than originally planned, reaching a total of $1 billion. The issuing of such a large number of 30-year bonds is reflection of the treasury's policy of increasing the average duration of Israeli government debt and significantly reducing the risk of rolling over government debt.
"This is a vote of confidence in the Israeli economy," said Finance Minister Yuval Steinitz, following the successful bond issue. "The fact that we continued to reduce debt relative to GDP in all recent years…has generated confidence among investors in the strength of the Israeli economy. This achievement is particularly remarkable given the ongoing debt crisis in Europe."   
The latest bond issue was the Israeli government's 10thdollar-denominated bond issue. The previous foreign currency-denominated bond issue was in January 2012. Israeli government dollar-denominated bonds are used by investors as a reference point for pricing the systemic risk in the Israeli economy. The latest bond issue represents the lowest cost for a dollar-denominated bond issue paid by the Israeli government and historically narrow interest rate spreads.
By the end of the bond offering, 95 percent of the bonds were acquired by non-Israeli investors hailing from 34 different countries.
Barclays, Goldman Sachs Group and Citigroup were the underwriters of the issue.
Stanley Fischer the esteemed Central Bank Governor announced his resignation the day before the issuance.
Here's what happened to the bonds

Did the State of Israel make a monkey out of you?

Global investors are entitled to feel duped by the resignation of Stanley Fischer less than a day after Israel raised a $2 billion overseas debt offering.




On Monday night, Israel raised $2 billion in an overseas offering of debt, in two series: one of 10-year bonds and one of long-term 30-year bonds. The accountant general's people over at the Finance Ministry said the investment community pounced on the debt. Demand soared to $9 billion, some 4.5 times the amount Israel sought to raise.
Moreover, the offerings closed at very low levels of interest, indicating that investors feel warm and fuzzy about Israeli state debt. The 30-year bonds closed at a spread of 1.45% over comparable U.S. government bonds, while the 10-year bonds closed at a spread of 1.25%. Those are very low spreads. They indicate, in theory, that investors feel Israeli debt isn't that much riskier than American debt.
The heavy demand coupled with the low spreads boil down to this: Investors badly wanted the goods. The demand and spreads are a sort of trophy for the Israeli economy and its leaders, and indeed the people over at the accountant general's office were strutting around like peacocks.
It's such a pity that the celebrations were abruptly truncated not a day later. The very next afternoon, Tuesday, Stanley Fischer up and quit as governor of the Bank of Israel, 22 months before his contract runs out.
Fischer will be staying on until June, but in response to the announcement, Israeli bonds – such hot stuff just the night before – abruptly dropped 1% in price.
Hmm..savvy time for the central bank + Goldman Sachs involved in the offering....
shab... shal .)
Lw

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