Accountant General Shuki Oren told "Globes" that the government's next bond offering will be held in Europe, not the US, and will be denominated in euros. The turn to Europe comes after last week's offering of 10-year notes in the US raised $1.5 billion at 5.2%, an especially low rate, and triple the originally intended amount.
The original goal of $500 million was increased when demand for the issue proved to be much higher, reaching $12 billion.
The final pricing process of last week's offering was delayed after Federal Reserve Board Chairman Ben S. Bernanke's announcement that the Fed would buy US Treasury securities, as well as mortgage-backed securities, sent the yields on 10-year US Treasury notes plummeting. The yields on US Treasury notes were the basis for the interest on Israeli government notes.
In view of the huge budget deficit of at least NIS 40 billion projected for this year, the Accountant General's Office believes that another issue of government notes will be needed overseas, in order to avoid adding more pressure to the currently frozen local non-bank credit market.
The last time that the Ministry of Finance raised money in European markets was in 2005, when it raised €750 million.
The Ministry of Finance was pleased by the results of last week's offering in the US. A ministry official said, "The Israeli economy was praised, and is beginning to be seen as one of the most attractive markets precisely at this time. It's important to remember that quite a few governments have tried to raise money recently, and either failed to so or were forced to raise the money at high interest rates."
Published by Globes [online], Israel business news - www.globes-online.com - on March 22, 2009
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