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The U.S. Federal Reserve's announcement Wednesday that it is intervening in the bond market delayed the closing of Israel's bond issue.

On Wednesday, Israel offered a $500 million bond issue without U.S. government guarantees, but after receiving a huge $12 billion demand, the treasury decided to triple the size of the offering to $1.5 billion.

Investors' bids called for a 2.62% premium over U.S. treasury note yields, but two hours before the offer was closed, the Fed made its announcement, which led to a sharp drop in U.S. yields. Yields on 10-year U.S. bonds fell from 2.9% at the opening of trading to 2.5% at closing.

This pushed down the yields investors had called for on the Israeli bond issue.

The treasury, lead by accountant general Yehoshua (Shuki) Oren, then began contacts with investors to discuss increasing yields as compensation. It considered several options, including not changing the bond conditions, but the treasury feared this would put it into conflict with investors it might need again soon.

The treasury also could have canceled the entire offer, but did not want to. This means it will have to compensate investors.

It is still not clear how the story will play out in the end, and whether Israel will complete the biggest bond issue in its history, and at what price.