The yield on ten-year shekel-denominated Israeli government bonds has surpassed 5% for the first time since 2011, indicating a slump in demand. The yield is currently around 4.85% and trading in these bonds has become relatively volatile. The widening spread between Israeli and US government bond yields suggests that foreign investors perceive Israel as a risky investment. Israel is currently priced as a country rated BBB, and the yields demanded on Israel's dollar-denominated bonds are approaching the level of developing economies rated BB. The risk premium on ten-year Israeli government bonds has more than doubled since before the war. In addition, Israel's fiscal deficit has increased to 7.2% of GDP. Without measures to reassure investors and restore confidence, the Israeli bond market is at risk of further deterioration [7d36841f].
Investors are increasingly turning to treasury bonds and bills for higher returns amid economic uncertainties and tightening monetary policies. The yield on three-month treasury bills has surged to 11.35%, while the yield on 10-year bonds reached a decade-high of over 12%. This makes treasury securities the most attractive fixed-income opportunity for individuals seeking capital preservation with higher returns. The previously popular National Savings Certificates (NSC) have become less lucrative in comparison. Treasury securities are considered zero default risk instruments, making them a preferred choice for banks, insurance companies, mutual funds, and other industries with surplus cash. The growing yield in bonds has also helped meet the government's increasing borrowing needs. Fixed-income mutual funds have seen their assets under management double within six to seven months. While the rising yield in bonds is beneficial for investors during times of economic challenges, it could potentially slow down the flow of credit and impact the economy, investment, and job creation in the future [32b0c430].
Treasury-bond investors are actively searching for opportunities to 'buy the dip' despite ongoing predictions of further market disruptions. The past year has seen treasury-bond investors navigating a sea of uncertainty, with fluctuating interest rates and inflation concerns leading to a roller-coaster market. However, a growing sentiment among these investors suggests a readiness to capitalize on lower prices, betting on a rebound or stabilization in the near future. The U.S. Department of the Treasury's Emergency Capital Investment Program (ECIP) has emerged as a pivotal element in this landscape, offering up to $9 billion in capital to certified Community Development Financial Institutions (CDFIs) and minority depository institutions (MDIs). Investors are now weighing their options, with many looking towards treasury bonds as a potentially safer haven amid the speculation of ongoing economic challenges. The success of programs like ECIP provides a glimmer of hope and a testament to the potential for strategic government intervention to mitigate market volatility. The resilience and strategic positioning of treasury-bond investors will likely play a crucial role in navigating the uncertain waters ahead.
The Municipal Securities Rulemaking Board has warned investors about the risks of buying Build America Bonds that are trading at more than 100 cents on the dollar. These bonds were sold in 2009 and 2010 through a federal program aimed at increasing state and local government spending on infrastructure. The federal government subsidizes some of the interest bills on the bonds instead of making the interest tax-exempt. However, these subsidies were cut over a decade ago, and governments have been refinancing them by buying the bonds back from investors. The regulator advises investors to be aware of the risk of buying these bonds, as being called can result in a loss, particularly for those who purchase the bonds at a premium. Despite this warning, treasury-bond investors continue to seek opportunities in the market, betting on a rebound or stabilization in the near future [f102ae2b].