As market prices rating upgrade, Treasury mulls o’seas offering

The release of the hostages and the ceasefire between Israel and Hamas has already contributed to the economic recovery in Israel. The risk premium in the country and regions on government bonds decreased sharply from its levels at the beginning of the war, and it may strengthen a shekel. However, the classification of sovereign credit for Israel has not yet improved. Because of the war, Israel’s classification was cut by Moody’s to BAA1, S&P and Fitch to A. The expectations of all three agencies of Israel are negative.

Now there is a conversation in the classification upgrade market. Economists believe that the promotion time will come soon. This expectation arises from a decrease in the Israeli risk allowance, and the promotion is expected to come during the year. The Israel classification has not been upgraded since 2018, when the S&P raised it to AA-, its highest level ever.

However, the evaluation agencies do not tend to act quickly, and as the classification classification in practice was performed by the markets, before the agencies give them their seal, so on a reserve path, the market will start in Israel’s pricing more positively before the country’s credit classification returns to its familiar level .

Meanwhile, there is work on the ground. The Office of the General Accountant at the Ministry of Finance, which is responsible for lifting debt, study whether the issue of external debt may be worthy of attention. Officials recently flew to London to test the willingness of foreign investment institutions. It seems that although there is no promotion in the wake of calming hostilities on the various fronts, Israel’s position seems better than it was at the time of the debt display abroad. Principles expect that a foreign issue can revive the sources of financing in Israel and have excellent results.

Israel’s credit rating is an important factor in determining the return that will be required in the issue of external debt, but it is less important in the routine weekly offers of the public accountant in the local market.

Thus, the question raises whether the presentation abroad is worth it. The bank is Habwalm, the chief economist, Victor Baher, believes that it is. “The revenue differences on Israeli bonds in dollars are 110 basis points above American bonds.

Israel rose the pace of local debt offers, as it was issued between 3.5 billion and 4.5 billion Newton and 4.5 billion NIS per week. The speed increased to meet the war needs. Large issues weigh the local market. The offer abroad enables funding sources to update and maintain access to foreign sources.

The last debt of sovereignty was signed by Israel last year. The country issued $ 8 billion of bonds from various cities, at interest rates ranging from 5.37 % and 5.75 %. The differences in the show 135, 145 and 175 basis points were long -term American bonds.

This was a successful offer, given that the war was at its height at the time, but the price differences put Israel in the BBB classification slide. It is now hoped that it will make the best conditions in Israel a better offer on better terms.

What will the classification agencies do?

“We see that there are differences between Moody’s on the one hand, S&P and Fitch on the other hand,” says Bahar. “Moody’s maintains a lower classification than other evaluation, based on the evaluation that Israel does not have a war of war, and therefore our situation may deteriorate.”

Since reducing the last classification, Bahar explains, that Israel’s position has improved significantly. “There is a ceasefire agreement with Lebanon, and we are in the first stage of the agreement to return the hostages from Gaza. They are now seen in a different light. There is a big difference from their evaluation.” From Bahr’s point of view, if things continue on their current path, there will be no choice but to raise the classification of Israel.

Moody’s was very reckless in Israel, and in many of her ads stressed what she considered high political risks. It believes that the Israeli government adopts policies that raise what are in any case of high social tensions in the country, such as a renewed confrontation with the legal system regarding the formation of the Supreme Court, and the government’s attempt to give a permanent exemption from the army to serve the Haredim, which most Israelis oppose.

In contrast to Moody’s, other classification agencies have been based on reducing their classification on the financial position of Israel, which is still a challenge. The market evaluation is that the expectations of classification agencies will first change from negativity to positive, after which the classifications themselves will rise. However, Israel has a way to go before returning to the A+ classification as it was before the war and the judicial reform program.

It was published by Globes, Israel Business News – En.globes.co.il – on January 22, 2025.

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