ISRAELI GOVERNMENT BONDS

How do government bonds work?

A bond is basically an interest-bearing loan which is guaranteed. Governments, like businesses, borrow money for lots of reasons – paying its debts, building infrastructure, funding social relief projects, or other nation-building challenges.

The bond includes a commitment from the Israeli government to pay the loan back, plus an agreed rate of interest while using your money – known as the bond coupon or yield. Your loan amount (bond price) is returned to you when the bond matures after a fixed period of time: anywhere from a few weeks to 50 years.

Anyone in the world can buy bonds from any country in the world. You do not need to be a citizen or resident of the country that is selling the government bonds.

What is the risk?

Traditionally, government bonds were always considered safer than buying stock or corporate bonds. The global financial collapse in 2008 drove many investors to increase the percentage of government bonds in their portfolios.

But in today’s global economy, some countries have failed to honor their bond commitments along with their other debts. A one-time failure is a credit event, while a prolonged failure is called sovereign default. According to Market Watch, even the USA has occasionally struggled to avoid default.

In contrast, the Israeli economy not only weathered the 2008 financial crisis, but even surged forward in growth. Financial observers have attributed this success to firm fiscal management.

Assessing a Country’s Stability

The reliability of a government bond is linked to the stability and vitality of the borrowing nation, which pays its debts from tax revenues. The more business activity a country has, and the more efficiently its government collects and uses the taxes (its fiscal management), the more likely you will be to enjoy profits from purchasing its bonds.

While many countries urge their citizens to buy government bonds as an expression of patriotism, informed investors will only buy government bonds from a country showing both political and economic stability.

ASSESSING A COUNTRY’S ECONOMIC STABILITY FOR BOND INVESTMENT

Check the country’s credit rating. The economic health of each country is analyzed by credit rating agencies. Among other things, these agencies evaluate:

  • how faithfully the nation repays its debts, including government bonds
  • the percentage of total debt compared to its productivity (GDP)
  • the stability of its currency
  • its political/social stability, which impacts the economy

Israel’s credit rating has slowly increased over the years. Its current grade from the world’s three leading credit rating agencies is: “A+ – stable” (Fitch, Nov. 2016), “A1-stable” (Moody, Sept. 2016) and “A+/A1 – stable” (S&P, Aug. 2016). This is the 5th highest score on a scale of 24 possible ratings.

How much demand is there for Israel government bonds?

Today the astonishing innovation coming out of Israel has earned it the nickname “Startup Nation” and has made its bonds a must for leading investors.

American billionaire Warren Buffet bought $5 million in Israel bonds for himself, and convinced a group of colleagues to buy another $60 million. Jewish Telegraph Agency.

They were not alone. Development Corporation for Israel (DCI) reported “a record-breaking $1.127 billion in U.S. sales in 2016 alone.” Jewish Business News, Feb. 2017

From 1951 to Feb. 2017, Israel has harnessed more than $40 billion in bond investments to drive its economy to the forefront of global innovation

What makes Israel government bonds so desirable for foreign investors?

1. Long-term financial security.

Israel enjoys the enviable position of having never once missed a debt payment. That makes Israel government bonds one of the most secure investments available — ideal for safeguarding retirement funds, or to preserve wealth for the next generation.

2. Sharing in the fruits of a vibrant economy.

*Israel has used its bond capital to build an economic powerhouse: Number One in the world per capital for high-tech startups, for venture capital investment, for medical equipment patents, and for published scientific papers.

*Recent discoveries of huge natural gas reserves, worth billions of dollars each, are about to make Israel one of the world’s energy producers. High-tech giants like Microsoft, Intel, IBM and Google are creating thousands of jobs for Israelis, creating a win-win situation for all involved.

*Wherever you look, the country’s economic development shows solid returns on bond investment.

3. Participation in a modern miracle.

*A country that has been forced to fight defensive wars since its birth, fend off countless terrorist and missile attacks, endure boycotts and refute gross disinformation about its actions.

*Yet this tiny nation, with a population smaller than that of London, has become a world leader in bio med, information technology, water reclamation, green-tech, military and cyber-defense, medical innovation, archaeological discoveries, and much more.

4. Support of a moral, humanitarian society.

Israel is admired for its prompt and generous response to disasters overseas, and it’s the only country awarded the highest available UN ranking for its emergency field hospitals and medical teams. It’s clear that buying Israel government bonds is one of the most ethical investments you can make.

Buying Israeli bonds in the UK

Buying Israel Government Bonds is now easier than ever before! You just need to purchase the government bonds from an FCA-regulated licensed broker authorised by the State of Israel. See the Process below,

IsraelInvestment maintains a working partnership with the authorised UK broker Bonds of Israel, who is ready with advice that can be custom-tailored to the needs of your investment portfolio.

But just to get an idea of the range available, here are some standard options:

Israeli Government Bond options for retail investors

Bonds in Sterling

Sterling Jubilee Bond (Fifth Sterling Series) (2-year): Minimum purchase of £1000
Sterling Savings Bond (Fifth Sterling Series) (2-year): Minimum purchase of £1000
Sterling Mazel Tov Savings Bonds (Fifth Sterling Series) (5-year): Minimum purchase of £100 and multiples of £10

Snapshot Summary

Minimum time commitment Minimum purchase value Interest Rate Bond Deal
2 Years £1000 2.03% Sterling Jubilee Bond
2 Years £1000 1.54% Sterling Savings Bond
5 years £100 1.94% Sterling Mazel Tov Savings Bonds

Buying Israeli Bonds in 3 Easy Steps

1/3 Think about which bond you are most interested in from the table above

2/3 Go to Bondsofisrael.com

3/3 Complete the secure forms with your identification

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