Corporate bonds take a pounding

Tel Aviv's bond indices fell hard yesterday, dragged down by Finance Minister Roni Bar-On's firm refusal to ride to the rescue of Israel's tycoons.

The Finance Ministry had already provided some relief to the corporate bonds sphere 10 days ago. It announced that long-term investment vehicles, such as provident funds and pension funds, could book up to 3% of their holdings in corporate bonds by purchase value, instead of market value. That allows the funds to avoid posting losses as the bonds plunge on the market. But evidently, the market was unpersuaded.

The Tel Bond-20 index (including the 20 weightiest corporate bonds on the market) lost 3.9% yesterday, falling to its lowest level since February 2007. The Tel Bond-40 index lost 6.4% and the Tel Bond-60 index (including all the bonds on the other two indices) fell by 4.9%.

A day after Oil Refineries had its bonds downgraded by three notches, its B2 series was down 7% by mid-morning. Makhteshim-Agan's 28-year B2 bonds (the longest in the market) were down 10%, a stunning loss for a vehicle like a debenture.

Yields on certain Africa Israel paper shot skyward, rising to 60%.

Nor were government bonds in favor yesterday. Fixed-income 19-year Shahar bonds lost a steep 1% while 8-year Shahars retreated by 0.3%. Short-term Galils were down 0.5%.