Bush Speech Gives Boost to Israel Bonds

Last week's speech by U.S. President George Bush lifted State of Israel bond prices in international markets.

Bush's declaration of faith in the Israeli economy is also the source of the shekel's gains against foreign currencies since Thursday, say market sources. The shekel's representative rate against the dollar was set at 4.745 yesterday - its strongest level in a month, compared to the previous rate of NIS 4.762 on Friday.

The prices of some of the Israel bonds unexpectedly surged by more than 1 percent last Thursday, narrowing the gap between their yields and yields on U.S. T-bills by up to 30 base points.

The gap between State of Israel and U.S. treasury bills now stands at 170 to 200 base points, characteristic of a BBB rating or less. Israel's credit status on international markets is A-minus. In recent weeks, Israel's economic chiefs have lobbied hard at the rating agencies to avert a possible sovereign credit rating downgrade. Traders say that a spurt of demand for Israeli bonds after Bush's speech also arrived from Israeli institutional investors, including insurance companies, as well as from American and European institutionals. But trading volumes remained minor, due to the wide gap between buy and ask rates.