January 9, 2020 / 12:43 PM / 14 days ago

Robust economy trumped security concerns in Israel bond issue -official

JERUSALEM, Jan 9 (Reuters) - The success of Israel’s record $3 billion international debt offering was due to its strong economy, while the country’s political stalemate and regional security problems were not a factor, a senior Finance Ministry official said on Thursday.

Deputy Accountant General Gil Cohen said the initial plan was for an offering of $2.5 billion of U.S. denominated bonds and strong demand could have pushed it to $4 billion, but in the end it was decided $3 billion was sufficient.

It coincided with heightened concern about security in the Middle East after the killing of an Iranian general last week and Iranian missile strikes on Wednesday on military bases in Iraq housing U.S. troops and as Israel is being run by a caretaker government.

But Cohen said investors were more interested in economic fundamentals, such as growth of 3.3% in 2019 to double the OECD average, a declining public debt burden, a rising per capita gross domestic product, a vibrant high-tech sector and the start of production at the Leviathan natural gas field that will supply Jordan and Egypt.

The results of the offering “reflect the strength of the economy and the relative value of the state of Israel,” Cohen told Reuters. “All the big name investors came.”

In Wednesday’s offering, Israel sold $2 billion of 30-year U.S.-denominated bonds at 3.375%, or 115 basis points over comparable U.S. Treasuries, and another $1 billion of 10-year bonds at 2.5%, or 68 basis points over Treasuries — the lowest-ever spreads for an Israeli international debt offering.

Demand for the issues reached an all-time high of $20 billion and attracted more than 400 different investors from 40 countries including the United States, Britain and Germany. Among the buyers were central banks, pension funds and insurance companies that already hold Israeli securities.

The ministry said there was high demand from Asian institutional investors, including Japan and Hong Kong.

The dollar issue was the 13th for Israel, which typically taps global markets every year, alternating between dollar- and euro-denominated offerings. In January 2019, it sold 2.5 billion euros ($2.8 billion) of 10- and 30-year debt. (Reporting by Steven Scheer, Editing by William Maclean)

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