Israel picked Goldman Sachs Group Inc, Barclays Plc and Citigroup Inc before government officials meet potential investors in Europe and US as borrowing costs tumble.
Officials from the ministry’s debt management unit will present Israel’s economy and debt structure to the investors next week to “ensure quick access to international markets in 2013,” the ministry said in an emailed statement today. The country is rated A1 at Moody’s Investors Service, the fifth- highest investment grade.
The plan comes amid calls by Bank of Israel Governor Stanley Fischer on the government to rein in the budget deficit, which he estimated at about 4.2 per cent of economic output in 2012, more than double the original plan. The yield on the government’s 4 per cent dollar-denominated bonds due June 2022 was little changed at 3 per cent at 2:12 pm in Tel Aviv, after falling to a record 2.94 per cent December 17, data compiled by Bloomberg show.
“This will be the cheapest funding ever for the government,” Eyal Klein, chief strategist at Israel Brokerage & Investments Ltd said today by phone from Tel Aviv. This year “will be a challenging year for the government and it makes sense to lock-in cheap money now.”
Prime Minister Benjamin Netanyahu called for early elections, scheduled for January 22, citing opposition to his budget plan. The cost of insuring Israel’s debt against default for five years dropped 63 basis points, or 0.63 percentage point, last year to 135, according to data compiled by Bloomberg. Lower prices signal improving perceptions of a borrower’s creditworthiness. The contracts pay the buyer face value in exchange for the underlying securities or cash if a borrower fails to adhere to its debt agreements.
Globes reported in December that Israel is seeking to raise as much as $1.5 billion in foreign bonds in order to diversify funding sources. Israel sold $1.5 billion of 10-year bonds in January 2012, the country’s first overseas offering in three years. The bonds have handed investors 13.4 per cent since January last year, compared with a return of 4.5 per cent in 2012 for the Bank of America Merrill Lynch Global Broad Market sovereign Plus Index.
The government’s benchmark 5.5 per cent local-currency bonds due January 2022 rose for a second day, sending the yield down six basis points to 3.74 per cent.
“Non-deal road shows are taking place to enable access to markets,” the Finance Ministry said yesterday in an e-mailed answer to questions from Bloomberg News. The accountant general’s office is studying a “foreign issuance as part of its yearly work plan,” the ministry said.