Government to issue its first U.S.-backed bonds in July
The government plans to issue its first bonds backed by U.S. loan guarantees in July, Haaretz has learned from sources near the subject. Israel is entitled to raise up to $9 billion in American-backed debt, at a pace of $3 billion a year.
The government plans to issue its first bonds backed by U.S. loan guarantees in July, Haaretz has learned from sources near the subject.
Israel is entitled to raise up to $9 billion in American-backed debt, at a pace of $3 billion a year. The sum involved is substantial, and allows the government to reduce its fund-raising efforts on the domestic market by tens of percentage points a month.
The price of the bonds will range from 40 to 60 basis points above ordinary American T-bills of the same period to maturation.
American government bonds today trade at yields of 3.9 percent. The yield on the Israeli government bonds should therefore range from 4.3 percent to 4.5 percent.
The U.S. has already agreed that Israel issue debt backed by the federal government, but the language of the guarantees has yet to be finalized. The issue at stake is whatever strings the Americans mean to attach, such as an Israeli pledge not to use the proceeds of U.S.-backed bonds for investment in settlements.
The Americans also want Israeli assurances regarding the extent of the government's budget deficit, but the ceiling on the deficit, and how the deficit will be calculated, have yet to be stipulated.
Last week an Israeli treasury team headed by director-general Ohad Marani and deputy accountant-general Elded Frecher flew to Washington for talks with the American team, led by Gary Edson, deputy to National Security Adviser Condoleezza Rice.
Following those talks, the agreement granting Israel the $9 billion in U.S. loan guarantees is expected to be signed later this week.
The Israeli delegation was presented with the U.S. conditions for transferring the loan guarantees, which included a demand that the principles of the government's economic austerity plan be passed by the Knesset. According to Israeli sources, the U.S. officials said that the most pressing conditions were the privatization of government corporations, cutting the public sector, and a substantial reduction in the budget deficit - all of which are in the government's economic austerity plan.